Human Resource Planning: Translating Strategy into Staffing Requirements - Principles of Management

Conroe Independent School District is growing by leaps and bounds. Enrollment at the Texan school district increased from just under 35,000 in 2000 to 42,000 in 2005. By 2012 the district estimates that it will serve more than 52,000 students. Aside from the challenges of figuring out how many schools to build and where to put them, Conroe’s managers must determine how many teachers and other staff with specific capabilities to hire each school year. In other words, Conroe’s managers rely on various forms of human resource (HR) planning —the process of ensuring that the organization has the right kinds of people in the right places at the right time.

HR planning is vital because it puts the right number of people with the right qualifications in place to achieve the organization’s strategic objectives in the most cost-effective and humane way. To illustrate the importance of HR planning, imagine if Conroe’s school board didn’t plan for its future human resource needs. The school board might not hire enough teachers, resulting in overcrowded classrooms.

Or if they hired too many teachers and other staff, Conroe’s managers would face the difficult task of laying people off. HR planning extends beyond numbers of people; it also tries to ensure that the organization has people with the required qualifications. For instance, HR planning minimizes the risk that Conroe’s school board has too many science teachers and not enough technical trades teachers.

HR planning is equally important for new strategic initiatives. When Verizon Communications, Inc., recently won the cable franchise in Hillsborough County (Tampa), Florida, its managers estimated that the telecommunications giant needed to hire 450 cable technicians in addition to the 1,500 it already employed in the counties surrounding Tampa Bay. By predicting the required number of qualified technicians, Verizon was able to quickly activate a recruitment and selection process and set up facilities to orient and train these new recruits. If Verizon hadn’t anticipated this number in advance, it would not have been as responsive when the contract was awarded.

HR planning occurs in many ways—some relevant to large companies, others more relevant to small businesses. However, all HR planning generally follows the five steps shown in Figure below and discussed next:

  1. Conduct a job analysis,
  2. estimate the demand for people in the future,
  3. document the current human resource supply,
  4. estimate the future internal human resource supply, and
  5. estimate the future external human resource supply.

STEP 1: CONDUCT JOB ANALYSIS

Traditionally HR planning begins with job analysis —the systematic investigation and documentation of duties performed, tools and equipment involved, conditions surrounding work, and competencies required by job incumbents to perform the work. This analysis typically results in a job description , which is a written statement of this information. Even Google, which grew quickly from a hobby at Stanford University in the late 1990s, writes job descriptions for many positions.

This documentation also includes the list of required competencies for the job (called a job specification ). Job analysis allows managers to categorize work so HR planning can identify needs more specifically. For instance, Conroe Independent School District would have job descriptions for teachers, principals, and various support staff. Job analysis also ensures that all required duties are assigned to people in specific jobs.

An increasing number of companies have reduced their reliance on job descriptions because the boundaries of job duties have become blurred as companies depend more on multiskilled teams than individuals to perform work. Job descriptions can still be created in flexible firms, but the descriptions are necessarily more generic rather than precisely relevant to a specific job. Still, job analysis remains a legal requirement to minimize the risk of job discrimination.

STEP 2: ESTIMATE HUMAN RESOURCE DEMAND

The second step in HR planning is to predict how many people with what competencies are required at some point in the future. As you can imagine, this prediction is not an exact science. It typically relies on organizational strategy, operational plans, and estimates of future demand for the organization’s products or services. Verizon would estimate the number of cable technicians to hire in Hillsborough County based either on the number of miles of cable that must be installed and maintained or on the number of customers projected for that area for the next few years.

At Conroe Independent School District and most other school districts, managers likely estimate future demand for teachers based on expected student enrollments and the ideal student–teacher ratio. If student enrollments are expected to grow by 1,000 students next year and the ideal ratio is 20 students per teacher, Conroe needs to employ 50 more teachers.

Human Resource Planning Process

Human Resource Planning Process

Of course Conroe will require different types of teachers, so this macro-level estimate needs to be supplemented with a micro-level prediction. For a micro-level estimate, managers examine the operational plans within their work units and estimate the number of people required to execute those plans. This information is judgmental but is closer to the ground, so it can pick up subtle requirements overlooked by the macro-level predictions. It tends to be better than macro estimates at taking into account specific capabilities, such as how many teachers are required with a background in science, who speak Spanish fluently, or have completed training in special education programs.

STEP 3: DOCUMENT CURRENT HUMAN RESOURCE SUPPLY

Projecting future demand is only part of the forecasting process. Another part is to estimate how many staff will still be employed by the organization at future dates. This estimate begins by examining the stock of employees—how many people are currently employed in each job group with specific competencies. Managers might simply document the number of employees in various positions as well as their credentials and competencies. However, most large organizations have sophisticated human resource information systems that track details about every employee and provide more precise estimates of future supply.

STEP 4: ESTIMATE FUTURE INTERNAL HUMAN RESOURCE SUPPLY

The next step in human resource planning is to estimate how many current employees will be in various jobs within the organization at some future date. This prediction of future internal human resource supply can occur at a macro level, micro level, or combination of both levels. At the macro level, managers use estimates of past flows of people through and out of the organization.

Conroe Independent School District can predict how many current teachers will be employed next year by looking at how many quit, retire, or otherwise leave the organization in a typical year. At the micro level, managers predict and plan for replacement of specific individuals based on their knowledge of those people. The principal and other managers at each school would have some information about which staff members are likely to quit, go on maternity or medical leave, or retire next year. This micro-level approach offers more precise information than the macro-level approach about what skills are required next year.

Dofasco, Inc., uses both the macro- and micro-level approaches to estimate its future supply of managers. At a macro-level analysis, it has figured out that more managers will retire over the next few years than it normally promotes and trains during that time. “It takes about 15 years to develop a good manager,” says Dave Santi, human resource manager at the successful Canadian steelmaker. “We just have to figure out a way to do it in seven or eight.” At the micro level, Dofasco searches for employees three or four levels below the manager and identifies those with leadership potential.

“We are trying to find out as much as we can about an individual’s qualities as early as possible,” says Santi. In fact, Dofasco begins its leadership competencies search at campus interviews with prospective employees. “We are looking for leadership qualities right from day one,” Santi explains. “It is not just the highest marks that get you into the company.”

STEP 5: ESTIMATE FUTURE EXTERNAL HUMAN RESOURCE SUPPLY

Employees quit, retire, and move into different jobs, so invariably managers depend on the external labor market for new recruits. But can the external supply deliver the human capital the company needs? Most managers today would loudly complain NO! There is a “war for talent” due to retiring baby boomers, rapidly changing technologies, and a host of other factors.

Google’s staffing dilemma, which we introduced at the beginning of this, is due in part to the dot-com meltdown a few years ago, which dramatically shrank Silicon Valley’s pool of high-tech talent. Even so, Google’s pickings were easier a couple of years ago when other high-tech firms were in a holding pattern. Today it seems that every company is battling over a limited number of applicants. One recent survey of 33,000 employers in 23 countries reported that 40 percent are struggling to find enough qualified job candidates.

Given every company’s dependence on the external labor market, managers must do all they can to anticipate and adjust their strategies and plans to estimates of the future human resource supply. Here’s a recent example: Eastern Europe experienced low birthrates during the early 1990s, which will soon result in a significant drop in the number of young people graduating from high school.

Managers at Anhalt Elektro Motor Works anticipated this problem during their human resource planning process a few years ago. The 165-employee specialty engine maker in Dessau, Germany, has since adjusted its staffing activities by hiring more workers over 50 years old. “Companies that still think they can just keep hiring young people out of school will very soon be in for a shock,” says Anhalt Elektro CEO Reiner Storch.

RELYING ON THE CONTINGENT WORKFORCE

The five-step HR planning process is somewhat simplified because it assumes that everyone is a permanent employee. Yet over the past two decades, companies have dramatically increased their reliance on contingent work . Contingent work includes any job in which the individual does not have an explicit or implicit contract for long-term employment, or one in which the minimum hours of work can vary in a nonsystematic way.

Many contingent workers are employees with temporary, fixed-term contracts with a company. Others are contractors assigned to specific projects who also work at other organizations. A third group includes people employed by temporary staffing agencies or contracting companies who work all of the time at a client’s offices as if they are employees. By some estimates, more than 15 percent of the U.S. workforce is employed in a contingent work arrangement. Experts predict that the percentage of the workforce in contingent work will continue to increase.

Contingent work has become more common because it gives companies greater flexibility in human resource planning. It is easier to increase or decrease the size of the workforce through contingent work contracts rather than by hiring and firing permanent employees. Organizations also respond faster to market demands by temporarily contracting skilled people than by retraining current staff in the new skills. Consultants and other skilled contractors bring valuable knowledge to the organization that is immediately applied and shared with others.

Another reason for the increasing reliance on contingent work is that many organizations offer fewer employer-paid benefits and lower wages to contingent workers than to permanent staff. Some employers also reduce administrative costs by outsourcing and leasing back noncore employees from a large professional company specializing in that field (such as information technology services).

Although contingent work seems to reduce payroll costs and increase flexibility around human resource demand, it also creates several potential problems. One concern is that contingent workers potentially have less loyalty and motivation to work for the organization because their employment is temporary or their allegiance is to the agency that actually employs them. Another concern is that both contingent and permanent employees who work side-by-side may feel uncomfortable or sense injustice because permanent staff have significantly better work arrangements. A third issue is that some contingent workers have less training and work experience, which leads to lower-quality products or services and higher accident rates.


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