HRM Unit- 2 Human Resource Planning (HRP) Concept

Broadly speaking, HRP is the estimation of the size (number) and composition (competency, skill, quality etc.) of future work-force to ensure survival and growth of the organization. HRP ensures that the organization has right number and kind of people at right place and at the time. According to Decenzo and Robbins, “HRP is the process by which an organization ensures that it has the right possible number and kind of people, at the right place, at

BBA / II Sem/ HRM
Unit- 2
Human Resource Planning (HRP)
Concept of HRP
HRP is the starting point of HRM. It is concerned with acquisition phase of HRM. Simply, HRP
is the planning for future personnel needs of an organization. Moreover, it is the process of
predetermining future human resource needs and selecting alternatives to satisfy such needs.
Broadly speaking, HRP is the estimation of the size (number) and composition (competency,
skill, quality etc.) of future work-force to ensure survival and growth of the organization. HRP
ensures that the organization has right number and kind of people at right place and at the time. It
is also called personnel planning or manpower planning.
According to Decenzo and Robbins, “HRP is the process by which an organization ensures that
it has the right number and kind of people, at the right place, at the right time, capable of
effectively and efficiently completing those tasks that will help the organization achieve its
overall objectives”.
B.P Coleman Provokes, “HRP is the process of determining manpower requirements and the
means for meeting those requirements in order to carry out the integrated plan of the
organization”.
R.W Mondy states, “The analysis of future personnel requirement is referred to as HRP”.
Therefore, HRP is the plan formulated with a view to attain organizational goal by acquiring
right type of person in right number and way at right time and place.
Characteristics of HRP
1. Goal Directed
HRP is directed towards achieving human resources goals as well as overall organizational goal.
2. Future Oriented
It is related with future time period. It forecasts the size and composition of future work-force. It
makes forecasting as well.
3. Quantitative & Qualitative
It estimates the required size or number of right employees with right skill and competency at
right time. So, it deals with both quantity and quality aspects.
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4. System Oriented
It is systematic planning indeed. It forecasts the demand of manpower as well as source of their
supply. It tries to match demand and supply with a view to avoid future shortage or excess.
Moreover, it prepares suitable action plan to resolve HR gaps.
5. Time Horizon
Every HRP has specified time frame. It can be short-termed or long termed. Especially, it is
prepared by considering long term survival and growth.
6. Continuous & Dynamic
The HRP prepared once may not be suitable for all the times. It is prepared till the organization
exists. Moreover, it is prepared in accordance with environmental changes.
7. Integral Part of Corporate Plan
It is prepared at all levels viz strategic level, tactical level, operational level as per the corporate
plan. In fact, it is one of the functional plans formulated to implement the corporate plan of the
organization. So, it stands as a part of corporate plan.
8. Part of Acquisition Phase
It is related with acquisition phase of HRM. Entire HRM functions begin with HRP.
Importance of HRP
HRP is the essence of organizational effectiveness. It supports to conduct the organizational
operation smoothly by providing essential manpower adequately as per the plan and program of
the organization. It is an invaluable means of attaining organization goal. It is important due to
following reasons:
1) Uncertainty Reduction
HRP helps to reduce uncertainty by projecting future manpower need. It performs essential work
to match demand and supply forecasts with a view to determine the excess or shortfall of future
manpower in terms of size and kind. It formulates action plan to address the problem evolved
due to excess or shortfall of manpower.
2) Objectives Achievement
It insists to attain overall goal. In fact, HRP is based on the overall goal, strategy and revenue
plan of the organization. It considers about the contribution possible to make by the human
resources and helps to attain the organizational goal.
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3) Environmental Adaptation
It assesses existing manpower through human resources inventory and job analysis. It projects
the possible changes going to occur in the environmental forces like economic, social, political,
legal, technological etc and formulates essential action plan to adopt the changes. Consequently,
the human resources can easily adapt the potential changes.
4) Acquisition of Human Resources
It determines in advance regarding the type and time of manpower requirement to support the
future plans and programs of organization. So, it provides guidance to manpower supply. It
serves as the basis of recruitment and selection to fulfill job vacancy.
5) Proper Utilization of Human Resources
It helps to perform organizational works in cost effective way by providing right persons at right
time in right number. It also helps to perform the employees effectively by utilizing their ability
optimally.
6) Human Resource Development (HRD)
It provides information about the necessary skill, ability etc. required to human resources
working at various levels. It gives due attention to training and development programs to be
conducted in organization with a view to enhance the ability of existing manpower. Such
programs help to reduce turnover, absenteeism etc which ultimately bring job satisfaction and
high morale.
7) Control
As HRP specifies the number and kind of manpower, it also serves as the standard of control.
Human resources control is not possible without it. So, it controls human resource cost.
8) Others
i. It supports the strategic plan of the organization.
ii. It facilitates collective bargaining.
iii. It helps to identify human resources related problem.
Human Resources Planning Process ( HRP Process )
Formulating HRP is essential to perform the work efficiently. Such plan is related with the long
range and strategic plan of the organization. Mostly, HRP is prepared for those persons who are
not easily available as well as requires long time to develop. HRP process includes the following
steps:-
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1. Assessing Current Human Resources
The process of HRP begins with the review of current manpower situation. In fact, the
assessment of current manpower is an internal analysis which provides information about present
jobs and persons doing them. For this purpose, it is necessary to prepare human resource
inventory (HRI) and perform job analysis.
(i) Human Resource Inventory (HRI)
It is the profile or statement providing information about the manpower currently working in the
organization. In the course of assessing its manpower, the organization has to keep proper
information regarding the capabilities, skill and number of manpower available currently. Such
information can be obtained through the profile filled up by employees themselves. It contains
general information (name, address, age, gender, marital status), ability (academic qualification,
performance level, training, experience, language) as well as possible jobs to be assigned (special
expertise, job and location preferences) etc.
( ii ) Job Analysis
It refers to the analysis of job related information. It provides information about the job to be
performed by an individual via any position, the activities under such job as well as the skill,
knowledge, personal qualities, behavior etc required to jobholders. Therefore, it is the systematic
exploration of the activities to be performed under a job.
2. Demand Forecasting
Neither the organization nor its human resource need remains static forever. Therefore, every
organization has to fix about the number and kind of human resources required to it. Here,
human resources demand refers to the total number of human resources required to organization
at various levels in order to perform its future program. So, here the number of manpower is
estimated depending on the objective, strategy and revenue plan of the organization. Various
methods like managerial judgment, ratio trend analysis, delphi technique, nominal group
technique, project/ venture analysis, mathematical model etc can be used to forecast the demand.
As manpower supply depends on demand, it is not rational to bring frequent change in human
resource demand.
3. Supply Forecasting
Human resource supply refers to determining the possible source of getting necessary manpower.
It estimates the future sources of manpower available inside and outside the organization. The
existing manpower may decrease due to resignation, retirement, transfer, dismissal, disability,
pro-longed disease, death etc. Similarly, it may not be adequate to facilitate the required
expansion. Such manpower can be obtained through transfer-in, training center, trade school,
migration, sponsorship etc. The methods such as managerial judgment, replacement planning,
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succession planning, markov analysis, gain or loss analysis, statistical techniques (trend analysis,
regression analysis, renewal analysis) are useful to forecast manpower supply.
4. Matching Demand and Supply
In this phase, it is tried to match the demand forecasting of manpower with its supply
forecasting. The supply plan should be prepared on the basis of the nature of manpower need of
the organization. The supply plan prepared without considering demand aspect contributes
nothing to organizational goal attainment. Therefore, preparing supply plan by analyzing
manpower need and supplying them accordingly is the matching of demand and supply e.g.
getting middle and lower level non-technical manpower from academic institution and hiring
technical as well as high level managerial position through borrowing from other sectors or from
experienced retired persons.
5. Preparation of Action Plan
HRP is not only a plan but it is also an action plan. Finally, an action plan is prepared to address
the excess or deficiency of human resources. In this regard, various plans relating to recruitment,
transfer, promotion, development, maintenance etc. are formulated. They entail recruitment
action plan, redeployment action plan, development action plan, retention action plan,
redundancy action plan, promotion action plan, succession action plan etc.
MAJOR HRP ACTIVITIES
Human resource Inventory (HRI)
HRI refers to the current position of human resources working in the organization. In fact, it is
skill inventory providing essential information about what an individual employee can do in
organization. The human resource currently working in the organization is a vital device of
performing future program of organization. Therefore, while formulating HRP every
organization has to assess the current status of its human resources. HRI proves useful to supply
such information. It can be prepared on the basis of the information fulfilled by the employees
themselves. There is the increasing tendency of using computer while preparing HRI. HRI
includes following information.
- Full name, address, age, sex and marital status of employee.
- Academic qualification of employee.
- Training attained.
- Prior job experience of employee.
- The job currently occupying by employee (job, job location and position).
- Performance level of employee.
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- Salary, allowance and other benefits drawing by employee.
- Knowledge of language (mother tongue, other languages known and standard of such
knowledge).
- Special ability of employee (expertise, knowledge and skill shown on specific sector).
- Job and location preferences (preferred job, preferred place).
In this way, HRI includes entire information about existing employees due to which the
information regarding existing human resources can be obtained exactly which facilitates their
optimum utilization by making easy to take decisions concerning to recruitment, selection,
promotion, transfer and retirement.
HRI is comprehensive indeed. It has 2 types Viz. management inventory and skill inventory.
(i) Management Inventory : It is the profile/ statement of managerial personnel working
in the organization.
(ii) Skill Inventory : It is the profile of employees working in non- managerial position.
Benefits of HRI
- It enables the management to assess the current ability in the organization.
- It proves useful to formulate plans about employee related issues such as recruitment, selection,
transfer, promotion and training.
-It serves as decision making tool to utilize existing manpower effectively.
- It works as the guide to diversify the operation as well as to identify the opportunity of
expansion.
- It helps to reduce organizational expenditure as well.
Management Inventory vs. Skill Inventory
Both of them are the part of human resource inventory (HRI). HRI contains entire information
relating to all employees irrespective of their levels. It specifies about what the employees can do
or the strength of the organization relating to employees. HRI has two parts. They are as follows:
1) Management Inventory (MI )
It is the profile of managerial personnel currently working in the organization. It provides
various information relating to managers. They contain personal data, skill data, position data,
compensation data, performance data etc.
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Benefits of MI
- It helps to formulate succession plan.
- It facilitates to deploy, transfer and promote the managers.
- It enables to identify development needs of managers.
- It helps to retain the quality managers permanently in the organization.
2) Skill Inventory
The inventory containing the information of non managerial staff is called skill inventory. So, it
entails the entire information relating to human resources other than managers.
Benefits of Skill Inventory
- It facilitates to assess the skills available currently in the organization.
- It enables to take decision regarding the deployment of human resources targeting the person-
job fit.
- It is helpful to decide about the diversification and expansion of operation.
- It helps to notice the skill deficiency and discard the threats relating to such deficiency.
Human Resource Information System (HR Information System)
It is a new tool of providing information about human resource inventory. It is a data based
information system prepared to store and provide information about human resource and the
work. It is computer based information system. It disseminates human resource related
information effectively without any additional cost. Therefore, HRIS is the data based and
computerized information system used to collect, store, analyze and disseminate the work and
workers related information. It is one of the integral parts of management information system
(MIS).
According to W.P. Anthony, “A human resource information system facilitates obtaining such
data in a logical, valid and reliable manner in order to assist in managerial decision making”.
Contents of HRIS
A HRIS contains following information relating to each employee:
1. Personal data: - It includes the name, address, birth date, marital status, person to kin,
family status etc. of every employee.
2. Skill data: - It entails academic qualification, specialized skill, knowledge and training
acquired, languages known or spoken.
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3. Position data: - It includes current position, occupational history, job location, various
responsibility discharged in the organization.
4. Compensation data:- It encompasses present salary level, salary deduction, salary
history, bonus, tax, overtime payment etc.
5. Performance data:- It contains current performance level, performance history,
fulfillment of performance contract, performance problems etc.
Benefits of HRIS
1. It helps to prepare human resource inventory by providing information about the
following:
- The number of existing employees on the basis of age, level, service, department,
skill.
- Number of the employees joining and leaving the organization and reason for
leaving.
- Labour turnover rate and its trend.
- Absent rate.
- Salary bill with overtime payment.
2. It proves very useful to forecast future manpower need as it provides necessary
information to different methods of forecasting.
3. The information stored under it can be used to identify the person for the purpose of
transfer, promotion, training and development etc.
4. It serves as the basis for job analysis.
In this way, HRIS assists to make each decision practical, rational and useful by helping to
draw logical and meaningful inferences. Due to it, the raw data obtained from various
sources can be presented as report. This HRIS must be linked with ‘Management Information
system’ in any organization.
Succession Planning (SP)
SP refers to the plan about the persons potential to work at managerial level in the organization.
HRIS includes the information about entire employees working in organization. While SP
includes the information about managers only due to which the future managerial need can be
projected. Therefore, SP is the process of estimating future managerial manpower need and
formulating plan for developing the manager to fulfill such need internally.
According to J.E. McElwain, “SP is the process of anticipating future managerial staffing
needs and making plans for the development of managers to meet those needs.”
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In fact, SP is an executive inventory report. It gives emphasis to the development of high potent
employees as well as keeps long term approach towards manpower need of the organization. It
insists mainly to middle and higher level managers as well as positions holding by them. Such
positions may fall vacant due to death, transfer, promotion, resignation, retirement and other
reasons.
Benefits of SP
1. It helps to fulfill managerial vacancy internally.
2. It facilitates career planning of the employees.
3. It helps to conform about the qualified persons working in the organization.
4. It determines the deficiency of manager, lack of skills etc in advance. Consequently,
incumbent (present) managers can be developed to assume more challenging
responsibilities in future.
5. It facilitates to keep right person at right place which ensures the continuity of operations.
HR Demand Forecasting Techniques
Every organization keeps deep interest in the estimation of future manpower need. As per the
study performed by Herman and Seltzer, the manager shows more than double interest in
forecasting demand rather than the supply. The organizational alternation, technological
advancement, production of new goods, contraction or expansion of business etc. create the need
of forecasting manpower. Similarly, the cases like resignation, retirement, dismissal, death,
inability, absenteeism also create the need of manpower forecasting. Some popular demand
forecasting methods are as follows:-
1. Managerial Judgment / Executive Judgment
The method of forecasting manpower by considering the workload, environmental factors as
well as future development and using judgment is called managerial judgment. Here, the
manager projects the manpower need on the basis of guess work depending on his experience.
So, manpower demand is estimated merely on rule of thumb assuming that the additional
manpower is required along with the increment in workload. As the managers are
knowledgeable, experienced, efficient etc., their projection would be more accurate. It is
economical and time saving as well. It is highly suitable for short run and small scale
organization.
2. Ratio Trend Analysis
It is the method of forecasting human resource demand by analyzing the current ratio between
work and manpower. It is little bit systematic and scientific than managerial judgment e.g. If an
employee can perform 10 units of work on each day, the ratio can be established as 1:10.
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It is simple, less costly and little bit scientific. It is useful to manufacturing industry. However, it
is not so useful to the works which are difficult to express in proportion and requires manpower
indirectly.
3. Work Study or Work Measurement Technique
Ratio trend analysis is suitable for similar types of work only. So, work study technique is used
in the organization where diverse types of work are performed. Here, every work is studied
separately, work standard is laid down and the number and kind of manpower required for
different works is estimated. It is suitable for other organizations except manufacturing industry.
4. Mathematical Models
Various mathematical models like probability, correlation and regression, average etc. can also
be used to forecast manpower demand. Such models help to determine the interrelationship
between various variables. Nowadays, growing use of computer has further accelerated the
popularity of such models. These models are helpful to determine manpower need consistently
by estimating business work, investment, production rate, sales etc. and presenting them in
suitable models.
5. Delphi Technique
It is the modified form of managerial judgment. This technique is developed by Rand
Corporation of USA during 1940s. It was originally used to forecast technological
developments. It is the systematic way of obtaining and refining the responses given by the
experts. Experts are sent a questionnaire regarding the manpower need in future. The questions
are modified or rearranged repeatedly by the moderator until all the experts have similar opinion
regarding the requirement of manpower in future.
6. Nominal Group Technique ( NGT )
It is another expert based technique of human resource demand forecasting. Here, the experts
work both individually and collectively. First of all, they sit around a table, they are not
permitted to talk with each other. The issue relating to human resource demand is presented by a
moderator. Afterwards, they are allowed to write or type their ideas on a sheet of paper or
computer. In the second phase, they are permitted to present the same before others. Finally, they
attempt to arrive at conclusion either unanimously or by ranking. Here, the experts meet face to
face.
7. Project Analysis or Venture Analysis
It is such method of forecasting human resource demand in which similar other projects are
analyzed. The human resources working in similar other ventures or projects or organizations are
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taken as the basis for determining human resource demand. For example: projecting / predicting
the human resource demand of proposed Dharan airport by analyzing the manpower currently
working in Biratnagar airport.
Sources of Manpower Supply
The existing manpower may decrease due to transfer out, compulsory retirement, resignation,
dismissal, death, sabbaticals etc. Such gap or deficiency should be fulfilled as early as possible.
The deficiency can be fulfilled by hiring new manpower from market, calling back the
sabbaticals as well as transferring inside the organization on the basis of emergency and priority.
Generally, necessary manpower can be supplied from external sources which are as follows:-
1. School /Campus /University
It is the largest, reliable and traditional source of manpower supply. Mostly, it is useful to get
non-technical manpower relating to all levels. They provide ordinary to highly educated
manpower.
2. Trade School and Training Center
Trade school produces professional or technical manpower. It gives emphasis to develop skill
and expertise. On the other hand, training center produces ordinary and semi skilled experts by
tendering training of skill and expertise. They provide middle and lower level technical
manpower.
3. Migration
Suitable manpower may also be shifted from elsewhere to the place where the organization
locates. Such migrated persons may also be useful to work in the organization.
4. Borrowing from Other Sectors
The suitable manpower may be working in competitive organization. In such a case, they can be
hired by showing the lure of handsome salary and other benefits. It is widely applied to fulfill
managerial position as well as high ranking technical persons.
5. Sponsored
Here, the required manpower is obtained by bearing the expenditure of study of any student of
concerned area and making agreement with him/ her about doing work in the concerned
organization for the specified period. So the persons getting fund become ready to provide
services to the concerned organization after the completion of the study.
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Techniques of HR Supply Forecasting
Similar to demand forecasting, supply forecasting is another vital part of HRP process. It can be
performed by using various techniques such as judgmental techniques, statistical techniques.
Some of them are as follows:
(1) Managerial Judgment
It is based on the judgment of managers. They apply the rule of thumb while
forecasting manpower supply. So, managers estimate the supply of human resource
depending on their guess work. It is a qualitative technique indeed.
(2) Replacement Planning
This method is based on the replacement chart. Such chart helps to know or show the
profile of incumbent jobholder on the basis of position, department etc they involve. It
helps to notice the possible vacancies and the person who can be utilized as
replacement at the time of need. It is also a qualitative technique. Here, the
replacement for every position or jobholder is identified. It covers relatively short
period.
(3) Succession Planning
It is an executive inventory report. It specifies the potential managerial staffing need
and the ways of fulfilling such need internally from the organization. In contrast to
replacement planning, it covers relatively longer period. It becomes instrumental to
notice the potential vacancies at top level and middle level as well as meeting them at
right time without failure. It is also a qualitative technique.
(4) Markov Analysis ( Markov Matrix or Transition Matrix )
It is the method of tracking the movement of employees through various positions or
jobs. Basically, it tracks past employee movement with a view to predict the future
supply. It shows the proportion of employees who remain in each job from one year
to another. It is a flow model which forecasts the supply of human resource internally.
Here, a matrix is prepared where future supply of HR is guesstimated. It is a
quantitative technique.
(5) Gain or Loss Analysis
It is another widely used method of identifying the supply of human resources
internally. It involves the following steps :
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- Determining the number of losses of employees ( Due to transfer out, promotion
or demotion, discharge etc.)
- Determining the number of gains of the employees ( Due to transfer in, promotion
etc.)
- Determining expected net internal supply ( Using following formula )
Net Beginning Projected Projected
= - +
Supply Inventory Loss Gain
It is also a quantitative technique.
(6) Statistical Techniques
The following statistical techniques can be employed to project HR supply
required in future :
(i) Trend Analysis
It enables to project the future supply on the basis of past trend. It is based on past
data or historical data. It assumes that the past trend will continue in future.
(ii)Regression Analysis
It is used to project future supply of human resources depending on the supply of
the past. So, it applies past supply to predict the supply required in future.
(iii)Renewal Analysis
It estimates future supply of human resources on the basis of upward movement
of employees, vacancies created due to growth and expansion of operations,
employee losses etc.
“People do not plan to fail, but they fail to plan.” - Peter F. Drucker
NISCHAL SUBEDI ‘NIRANTAR’ MMC - Dharan
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