Armstrong (2001) has modified the phases of traditional human resource planning to reflect aims more appropriate for contemporary circumstances. He outlines these aims as:
This approach differs from traditional HRP in that it puts greater emphasis on the ‘soft’ side of HRP but there are still elements of the ‘hard’ approach, e.g. in the balance between demand and supply forecasting. It also differs from the traditional approach in its emphasis on the internal labour supply. The key stages of the model are shown in Figure. A fundamental difference between this model and the traditional HRP model is the underlying assumption that much of the process might be rather vague:
It cannot be assumed that there will be a well-articulated business plan as a basis for the HR plans. The business strategy may be evolutionary rather than deliberate; it may be fragmented, intuitive and incremental. Resourcing decisions may be based on scenarios that are riddled with assumptions that may or may not be correct and cannot be tested. Resourcing strategy may be equally vague or based on unproven beliefs about the future. It may contain statements about, for example, building the skills base, which are little more than rhetoric. (Armstrong, 2001: 362)
Such statements could lead one to question whether there is any point to the process at all! Armstrong (2001) goes on to argue that even if all that is achieved is a broad statement of intent, ‘this could be sufficient to guide resourcing practice generally and would be better than nothing at all’. However, this does suggest that any plans inevitably have to be tentative, flexible and reviewed and modified on a regular basis.
HRP – A contemporary approach
The first key element of this model is business strategy. Strategy has been defined as: Business strategy can be either deliberate or emergent (Whittington, 1993). Deliberate strategies assume a rational evaluation of external and internal circumstances and an identification of the best way to ensure competitive advantage. Emergent strategies, on the other hand, are the product of market forces: ‘the most appropriate strategies … emerge as competitive processes that allow the relatively better performers to survive while the weaker performers are squeezed out’ (Legge, 1995: 99).
In this model the resourcing strategy derives from the business strategy and also feeds into it. For example, the identification of particular strengths and capabilities might lead to new business goals, especially if strategy formation is emergent rather than deliberate. The rationale underpinning Armstrong’s perception of this strategy is related to the resourcebased view of the firm (see Chapter): ‘the aim of this strategy is therefore to ensure that a firm achieves competitive advantage by employing more capable people than its rivals’ (Armstrong, 2001: 364).
Thus, the implicit assumption is that the vertical integration between business strategy and resourcing strategy will include practices designed to attract and retain a high-quality workforce, such as offering rewards and opportunities that are better than competitors and seeking to maximise commitment and trust.
Porter (1985) proposes three strategic options for securing competitive advantage: cost reduction, quality enhancement and innovation. A high-commitment approach is more likely to ‘fit’ with the latter two strategies than with a strategy based on cost reduction. Work in the USA (Arthur, 1992) found that the majority of firms in the study that were following a cost reduction business strategy had poor HR practices (e.g. relatively low pay, minimal training, little communication and no formal grievance mechanisms). However, the cost reduction model is frequently associated with a lack of formalization and planning (see, for example, Sisson and Storey, 2000; Marchington and Wilkinson, 2002) so the process of developing a resourcing strategy may be more likely to include a high-commitment approach.
This element is not explicit in traditional HRP models and reflects a development in planning models designed to cope with increased uncertainty and unpredictability in the environment. Scenario planning can be used to supplement or replace more traditional demand and supply forecasting. This approach is ‘predicated on the assumption that if you cannot predict the future, then by speculating on a variety of them, you might just hit upon the right one’ (Mintzberg, 1994: 248).
Mintzberg (1994) argues that it is difficult to determine the required number of scenarios, i.e. enough to have a good chance of getting it right but not so many as to be unmanageable. The ease with which scenario planning can be undertaken has been greatly improved by the use of computer modelling, in which figures and formulae can be altered to calculate the implications of different predictions. However, this can in itself lead to problems of information overload and difficulties in how to respond to the results. Porter (1985) suggests five key options:
This approach can help to broaden perspectives and consider a number of future options but each decision has its own costs and these also need to be considered. For example, opting to preserve flexibility might be a the expense of following a clear-cut business strategy to secure competitive advantage. Similarly, devoting resources to the best scenario for the organisation might be little more than wishful thinking. Scenario planning has been described here as a fairly formal process but it can also be regarded as an informal approach to thinking about the future in broad terms, based upon an analysis of likely changes in the internal and external environment (Armstrong, 2001).
Forecasting and labour turnover
Demand and supply forecasting in the model includes all the objective and subjective techniques described in the traditional model. The key difference lies in the emphasis given to labour turnover analysis; in the traditional model this is seen as an element of supply forecasting but here it is deemed worthy of its own category. Nevertheless, the techniques used to measure it are the same as discussed earlier in the chapter.
Human resource plans
Human resource plans are derived from the resourcing strategy and take into account data from a combination of scenario planning, demand and supply forecasting and labour turnover analysis. The model again reflects the lack of certainty and predictability: ‘the plans often have to be short term and flexible because of the difficulty of making firm predictions about human resource requirements in times of rapid change’ (Armstrong, 2001: 375). The plans are divided into four broad areas: resourcing, flexibility, retention and downsizing.
This is primarily concerned with effective use of the internal labour market as well as attracting high-quality external applicants. Armstrong (2001) identifies two main components to the resourcing plan: the recruitment plan (e.g. numbers and types of people required, sources of candidates, recruitment techniques, etc.) and the ‘employer of choice’ plan.
Steps that organisations have taken to find additional sources of applicants to address skills shortages and improve the diversity of the workforce are discussed in Chapter, so here we highlight some of the initiatives used to make employers more attractive to high-quality applicants. The CIPD Recruitment and Retention Survey (2002b) found that nearly two-thirds of employers have increased starting salaries or benefits for recruits and 70 per cent have either introduced or improved the flexibility of working hours.
Some organisations also offer ‘golden hellos’ (financial inducements to new recruits), particularly to graduates. The CIPD survey found little evidence of this but other studies (e.g. IRS, 2001c) list a number of organisations that offer signing-on bonuses, e.g. Boots, Barclays, HSBC and Price Waterhouse Coopers. The practice is mainly restricted to larger, private sector organisations but has recently spread to the public sector, e.g. teaching and some areas of local government. The main reasons for introducing a golden hello (IRS, 2001c) are:
In addition to being able to attract high-quality applicants, organisations also have to be able to keep them. Other initiatives to become an ‘employer of choice’ might include providing opportunities for development and career progression and addressing work–life balance issues. Williams (2000) takes this a step further by arguing that organisations need to create the right environment in order to win ‘the war for talent.
The flexibility plan is likely to involve the use of functional and numerical flexibility (discussed more fully in Chapter). Armstrong (2001: 376) suggests that the aim of the flexibility plan should be to:
From this perspective, flexibility appears to be mainly employer-driven rather than a means to help employees achieve work–life balance and therefore there may be some potential contradictions between this and the ‘employer of choice’ plan described above.
Alternatively, it may be that different plans can be applied to different sections of the workforce. Purcell (1999) suggests that distinctions are growing in the treatment of core workers who may be nurtured owing to their contribution to competitive advantage, and non-core peripheral or subcontracted workers.
Manfred Kets de Vries (cited in Williams, 2000: 28) stated that ‘today’s high performers are like frogs in a wheelbarrow: they can jump out at any time’. It seems that increasing numbers of organisations recognise this and are turning their attention to the retention of key staff.
The exact components of the retention plan will be largely determined by the outcomes of labour turnover analysis and risk analysis and initiatives are likely to focus on ‘pull’ factors. Retention measures can include some or all of the following (Bevan,1997; IDS, 2000):
The fourth element of the human resource plan is the downsizing plan. This is concerned with the numbers to be ‘downsized’, the timing of any reductions and the process itself. Methods of reducing the size of the workforce include natural wastage, redeployment, early retirement, voluntary and compulsory redundancy. Armstrong (2001: 382) implies that this plan is implemented as a last resort: ‘if all else fails, it may be necessary to deal with unacceptable employment costs or surplus numbers of employees by what has euphemistically come to be known as downsizing’.
However, other commentators suggest that downsizing is fairly endemic in the UK:
Hutton was writing in the late 90s but it is still relatively easy to find examples of organisations radically reducing the size of the workforce. For example, Shell plans to lay off 4000 staff (Griffiths, 2003) and Corus plans to lose a further 3000 (Harrison, 2003).
Several studies (e.g. Bennet, 1991; Cascio, 1993) suggest that downsizing frequently fails to bring the anticipated cost savings for organisations, leading Redman and Wilkinson (2001: 319) to state that ‘ despite the real sufferings of many workers in an era of redundancy there have been few long-term benefits to justify its level of severity, nor an overwhelming economic justification for its continuing blanket use’.
‘It’s human resource planning, Jim, but not as we know it’
Changes in organisational structures and the uncertainty of the environment have led to the development of more flexible and focused approaches to planning. Taylor (2002: 78–85) suggests a number of variants on the traditional planning process that may be more appropriate to organisations with unpredictable markets and structures.
Micro-planning uses similar techniques to more traditional HRP but concentrates on key problem areas rather than the organisation as a whole. The more limited scope, both in terms of coverage and time, makes the process more manageable and the results more immediately visible. Micro-planning is likely to be a one-off activity rather than an ongoing process. It can be used to address a variety of issues such as skills shortages, new legislation, competitor activity or a new business opportunity.
Contingency planningis based on scenario planning and enables organisations to draw up a number of different plans to deal with different scenarios. This can enable HRP to switch from being a reactive process undertaken in order to assist the organization achieve its aims, to become a proactive process undertaken prior to the formulation of wider organisational objectives and strategies (Taylor, 2002: 79). On the other hand, Mintzberg (1994: 252) argues that, in practice, contingency planning presents several problems. Firstly, the contingency that does occur may not be one that was thought of; and secondly, the presentation of a number of different options may lead to no action at all – ‘paralysis by analysis’.
In succession planningthe focus is primarily on recruitment and retention and the ability of the organisation to fill key posts. It is likely that this will relate to a relatively narrow group of people. There is nothing new about organisations identifying and grooming people to fill key posts; in fact, succession planning has always been an element of traditional HRP. The traditional approach relied on identifying a few key individuals who would be ready to take on senior roles at certain points in time.
However, to be effective, this requires a stable environment and long-term career plans. In response to a rapidly changing environment where the future is uncertain, the focus has moved away from identifying an individual to fill a specific job towards developing talent for groups of jobs and planning for jobs that do not yet exist. In addition, the emphasis is on balancing the needs of the organisation with the aspirations of employees and on increasing the diversity of the senior management group in terms of competencies and qualities (IRS, 2002b).
The lack of labour market protection, the weakness of unions and the intense pressure on private and public sector companies alike to improve their profitability and efficiency have meant that the fashionable doctrine of downsizing has spread like contagion. (Hutton, 1997: 40) Succession planning is often linked to competency frameworks and the key challenge is to identify the competencies that will contribute to future organisational performance rather than those that have been valued in the past.
Astra Zeneca identifies seven leadership competencies: provides clarity about strategic direction, builds relationships, ensures commitment, develops people, focuses on delivery, builds self-awareness and demonstrates personal conviction (IRS, 2002b: 42). Holbeche (2000) cites the five key types of skills, knowledge and aptitude critical to future success identified by Brent Allred et al.:
Another key issue in contemporary succession planning concerns the balance between internal and external labour markets. Succession planning can be used as a means to retain and motivate key members of the existing workforce but there is a danger that the organisation can become stale in the absence of ‘new blood’.
Some senior external appointments are therefore necessary to improve diversity and to bring on board people with different skills and experience but too many can result in frustration and the loss of some key talent.
Skills planning, an adaptation of traditional HRP, moves away from a focus on planning for people to one that looks primarily at the skills required (Taylor, 2002).
Forecasting concentrates on the identification of competencies necessary for future organisational performance rather than on the numbers and types of people required. Skills planning builds on the ideas inherent in Armstrong’s (2001) flexibility plan in its assumption that the required skills might be secured by a variety of means, including short-term contracts, agency workers, subcontracting, outsourcing, etc.
Various meanings of soft human resource planningwere discussed earlier in the chapter.
Taylor (2002: 84) interprets this in its relatively narrow sense, i.e. as a distinct range of activities focusing on forecasting the supply and demand for particular attitudes and behaviours rather than attitudes and skills. Part of this process involves gathering data on employee attitudes in a number of areas, e.g. motivation, job satisfaction, management effectiveness and commitment to the organisation. This can be done in a variety of ways, such as employee interviews, attitude surveys and focus groups. Attitude surveys appear to be growing in popularity: a recent survey (IRS, 2001d) found that 66 per cent of respondents are currently using them and a further 21 per cent are either planning to use them in the next year or are seriously considering their use in the future. The same study (IRS, 2001c: 8) found the main topics covered in attitude surveys to be:
As in traditional HRP, forecasting is also concerned with external supply issues. The main difference is that soft HRP is less concerned with the availability of people and skills than with the attitudes and expectations of potential employees. Schuler (1998: 79) highlights the different expectations and values of three distinct age groups in today’s workforce:
Acting on the results of attitude surveys and assessments of broader societal expectations can help organisations attract and retain the attitudes believed necessary for future success. Retention can be viewed as one of the key aims of soft HRP, but again the concern is less with keeping specific people and more to do with securing commitment and loyalty to the organisation. One way to achieve this is through career management, i.e. processes to encourage the progression of individuals in line with personal preferences and capabilities and organisational requirements.
Like succession planning, this can provide a potential win–win situation in that employees gain opportunities for development and feel valued while the organisation is able to fill posts internally. However, it can be difficult to sustain in times of uncertainty when job security is threatened.
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