Of all the resources in an organization, it is the human workforce that is considered most valuable. Only people can come up with innovative ideas to improve efficiency. Men are required to operate machinery. They are the ones who can create strategies and implement them. That is why organizations need to plan their human resources and ensure they have the right mix of people. HR managers play the vital role of planning a firm’s staffing requirements and employing them.
Importance Of Human Resource Management
Before we look at human resource planning, it is worth understanding what HR management is. This is a function that takes care of all aspects of human elements inside a company. Being the most valuable resource in a company, managing humans carries importance and must be done by experts in this subject. These professionals are responsible for searching, hiring, training, and retaining employees. They must make sure that the capabilities of the manpower are utilized for achieving company goals while not sacrificing their objectives.
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Human resources management is critical for every company because companies can’t achieve their goals unless people contribute their best efforts. People must also work cohesively towards the objectives. They must also reach their personal aims, without which they will not stay in the company. Retaining employees is an essential function under human resource management. Recruiting new persons is an expensive and tiring procedure. HR management is highly critical because people and their well-being are involved.
Now that we have understood why people management is crucial, let us see what human resource planning is and why companies must perform this task.
Understanding Human Resource Planning
Those studying an XLRI course on HR management can explain that human resource planning is a process by which a company achieves the desired level of the human workforce. With thorough planning and execution, it is expected that there will be the right people in suitable positions. Such a situation will allow companies to achieve their objectives while also enabling employees to grow and advance in their careers. Both companies and individuals will have long-term benefits and will continue to be happy with each other.
When we talk about human resources, it doesn’t only refer to the staff strength. HR managers must do planning to ensure that the necessary skills, commitment, motivation, knowledge, and values are achieved. Companies must do human resource planning to satisfy the current and future manpower requirements of a firm. Both these must be appropriately aligned with the goals of the organization. It also includes developing existing staff members to meet future needs of technical knowledge and capability.
Human resource planning starts much before a company starts functioning. It is a process of converting a company’s objectives into the number of people required to achieve them. But HR planning doesn’t just happen in a new company. It also takes place when organizations expand. To complete the expansion plans and to achieve their revised goals, firms will require to increase their staff strength. At this time also excellent planning is necessary to get work done at the least cost.
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Let us now see why human resource planning is important for companies.
Importance Of Human Resource Planning
Assessing The Right Number Of Employees Required
Having excess or fewer staff members can be a problem for any company. If there aren’t enough employees to complete all jobs, a firm can’t achieve its goals. Having surplus staff members can lead to excess expense and a drain on profits. Human resources planning is the way to ensure that there is just the correct staff strength that will help a firm achieve its goals. When the number of employees is apt, they will also get quick promotions and better pay.
Planning Lays The Foundation For Other Tasks
As human resource planning is the first task undertaken by the department, it lays the foundation for all other tasks. When planning is done, the officials can know-how recruitment must be done. They can decide on selection criteria. When they know what people are required, it also helps provide training for existing staff to make them skilled to occupy higher positions. Good planning also helps provide funds to pay salaries for the additional employees and increments to deserving people.
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Preparing For Changes
Business and market environments are constantly changing. Job nature itself can change when there are changes in the market. The introduction of new technologies has made it necessary for employees to be appropriately skilled to adopt them. This will need training of existing employees or recruitment of new ones. Personnel managers keep an eye for such developments and plan accordingly. When HR planning is done correctly, it helps companies prepare for the changes and ensure that their employees can keep pace with the changes.
Investing In Workforce
Adding human resources will need additional funds. Such an investment must give the best returns. Planning is a part of human capital management that helps prepare for such investment and know what returns can be expected. It enables the top management to understand whether the money spent on inducting new employees will be profitable. Good planning will ensure that those who are recruited are most suitable for the job. These employees will give good benefits to a firm.
Enables To Make Expansion Plans
With human resource planning, companies can know exactly how many people are needed and what it will cost the company. Such information is vital during company expansion and diversification. Labor costs in different regions can vary. When a company is planning expansion to a new area, HR officials will check the prices in these areas and estimate. Such planning is helpful for management to assess how much the expansion will cost them and what revenues must be earned to offset this.
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Manage Employee Turnover
There is a good demand for qualified and skilled people in India. This results in high employee turnover in many industries. People are constantly looking for better opportunities, and they don’t hesitate to move to a new company when the chance occurs. This means that companies will have a shortage of staff members. Human resource planning will consider such factors and make sure that they are ready with replacements when people leave. This will help work to go on smoothly without interruption.
Implement International Expansion Plan
As globalization progresses, many companies are looking at expansion to other countries. There are many countries with huge potential for Indian products. It will be beneficial for companies to expand to such nations. But there must be a clear idea for the management about how much it will cost them to employ staff for these operations abroad. Human resource planning will give an exact estimate about how many people will be needed and how much it will cost the company.
Managing Technology Integration
New technologies are frequently emerging, and this makes work more efficient and fast. The integration of such technology also reduces the need for the human workforce. As companies adopt modern developments, there is bound to be an excess of employees in specific departments. Companies must decide what to do with these people, making sure that they don’t suffer in any manner. Human resource planning is an essential activity before such technologies are introduced in a company.
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Objectives Of Human Resource Planning
We have seen how vital HR planning is. It is essential to know what objectives this process will achieve.
- HR planning allows for accurate assessment of future human resource needs.
- This process helps to avoid excess or short staffing.
- Companies will have suitably skilled manpower.
- Companies can do modernization and technology integration easily.
- HR planning helps companies achieve their objectives with the right workforce.
- Good human resources planning helps reduce employment costs.
- With planning, skill requirements can be fulfilled.
- Employees also benefit by being able to achieve their objectives.
- Training needs of employees can be planned correctly.
- Planning helps improve employee productivity.
Steps In Human Resource Planning
Human resource planning starts with analyzing the requirements of various departments. Not every business unit will need to add people. Some may want to reduce some staff members due to automation. HR departments must analyze all the requirements and decide whether to recruit people or move some from one department to another. They must consider the organization’s objectives when planning for people. Understanding the goals of different departments helps to know the changes necessary in the organization.
Taking The Human Resource Inventory
Once the necessary changes have been identified, the next step in human resource planning is to take an inventory of the available workforce in the firm. Human resources will not just include the people but also their capabilities, skills, and performing capacities. This will help the HR planning officials decide how to fill the vacancies due to additional requirements of various departments. They can determine whether they can find the people from within or have to recruit new hands.
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Forecast Employee Demand And Supply
Human resource planning also helps in forecasting the demand for employees in various departments. HR officials understand the development plans of each business unit and predict how many employees they will need. These officials can also use analytics to find out employee requirements for the future. Another important task they undertake is to find out how the supply of people will be in the future. This is essential to decide the right time to hire more people. Such forecasting helps to acquire the best talents at low costs.
Knowing The Gaps
Once the demand and supply are forecasted, personnel managers can understand what gaps will be arising in the future. There can be either shortage or surplus of employees in future. Among departments themselves, some can have excess and others not have enough people. Knowing the gaps helps the human resource managers to see how they can be offset by using people from within. Sometimes it is possible to train some surplus workers and make them capable of filling up vacant positions.
Create A Plan
Once the gaps are identified along with departmental requirements and supply status, it is time to formulate a plan to fill them. The HR management team can decide how they must do this. They can recruit, transfer, terminate, retire or upskill employees to ensure that every business unit has the required staff members. They must also ensure there are no surplus workers, which can drain the profits. The plan must also include the costs that will be incurred for these activities.
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Implement The Plan
The next step in planning is to implement the plan. It is not as easy as it sounds because it will need acceptance and permission from business heads and the top bosses. Funds must be allocated for hiring, training, or termination of employees. Departmental heads must concur with the plans made by HR. Training must be arranged where necessary and ensured that the person selected for promotion would fit the role perfectly. If they must recruit, then personnel managers must initiate the procedures for that.
Monitoring and controlling
The implementation is not entirely in the hands of the HR department. Even in the department, the planning team won’t be the ones to recruit people. Training is given by someone else, either from within the company or outside. Department heads must keep track of their new additions, if any. If they have reduced workers, they must ensure that the work is being done by someone else. The HR planning team must collect all this information to ensure proper implementation of the plan.
Human resource planning is the way of finding out and filling the staffing requirements of a firm. We have seen the steps in this process. Now it is essential to see what factors must be considered when making a human resource plan.
Factors Affecting Human Resource Planning
The employment situation in a region or the country is a significant factor that affects resource planning. Depending on whether there is high unemployment or a shortage of skilled people, labor costs can change. Cost is an essential factor in HR planning, which can affect how an organization fulfills its manpower requirements. Sometimes the shortage of people with specific skills can also raise their costs steeply. In such cases, companies may shelve the plan to appoint anyone and outsource such jobs.
Type And Objectives Of The Organization
This is another essential aspect that is considered when planning for human resources. Companies in the same industry may vary from each other in their style of functioning. This can affect the way the workforce is designed. The objectives of a company will also have an impact on the selection of the type of workforce. If a company plans to have organic growth, it will need to appoint additional staff members. But if it aims to grow through mergers or acquisitions, it may have to restructure or reduce employees to avoid overlapping functions.
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An organization goes through different stages, from embryonic to declining. At various stages, its requirement of employees is different. When it starts functioning, there may not be much HR planning required as the organization must get its footing firmly. When the firm starts growing, there will be hectic workforce planning as there is a need for additional employees. In the mature stage, there will hardly be any need for more workers. The plans will be only for the retirement of existing personnel. When the enterprise starts to decline then, HR will be planning for reductions or layoffs.
Human capital management is greatly affected by advancements in technology. Any new development is immediately used for commercial purposes. Companies adopt modern sciences to improve efficiency and reduce costs. This will also result in the need for a lesser human workforce. When doing HR planning, officials must indeed look at whether there is a possibility of adopting new technologies and how many employees will be replaced by the machines. Companies must do planning to relocate or reduce the employees.
Both the company’s the nation’s economy will affect employment planning. If the company is going through a financial crisis, any addition of human resources will be put on hold. HR officials will be more concerned about retaining existing employees. The economy of a country can also affect workforce planning. If the nation goes into recession, then there will be less money with people. Their purchases will be restricted to essentials. This will result in reduced sales of many items. Companies making such products will not plan for any expansion or human resources addition.
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Companies will need to plan for both the present and future. Short-term planning will be different from long-term planning. With so many uncertainties in the market, long-term planning may undergo various changes before it is implemented. But short-term plans are executed quickly because situations can change rapidly. If a company is going through an uncertain phase, there may be no long-term planning. New companies will make more short-term plans till they stabilize. Planning must be completed, taking into consideration the goals of the company and their duration.
Quality Of Data
Modern HR managers take the help of analytics when planning for people. This is an excellent way to understand past incidents and get valuable insights for the future. Analytics is done using past data held by a firm and from external sources. The quality of data is a very critical factor for getting the right results. If the information is not used correctly, analytics results will vary and lead to wrong decisions. This is why HR officials must ensure that quality data is used when planning for human resources.
Inclusiveness is every corporation’s responsibility. Whatever be the size of the establishment, it must make sure that the staff comprises all communities and genders. Avoiding people from certain communities or genders can significantly affect the efficiency of the firm. This can also go against its social responsibility obligations. When planning for a workforce, HR managers must ensure that enough representation is there for all communities and genders. They must also see that the local community is given more preference to get their support.
Though human resource planning is a critical function for every organization, not everyone seems to think so. There are various obstacles to complete the workforce planning task. Some of these are man-made, and others are due to the improper use of technology. Such barriers make it difficult for HR managers to plan the workforce correctly. This can result in the firm having either excess, short or unskilled employees. It is worth looking at these challenges in detail.
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Obstacles To Human Resource Planning
1. Lack Of Support
Any activity in a company will be successful only if the top management supports it. Human resource planning is no different. But in many companies, it can be seen that the chiefs consider HR planning as a waste of time. They are in a false notion that people can be recruited at any time, and there is no need to plan for that. Such a lack of support can be a major obstacle to this activity. HR managers must convince their bosses that the company could find itself falling short or having excess staff without proper planning.
2. Not Understanding HR Officials
It is very common to see managers controlling human resources departments being considered as not the right people to recruit. Department heads often feel that they are more qualified to plan and select the workforce for their team. This can put HR managers in a challenging position. They need to convince department heads about their capability to appoint the right people to achieve its goals. The previous aspect is essential for this. They must get the support of their top management.
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3. Incompatible Information
A company makes its strategic plans on a long-term basis. The information used for this purpose is with the view to forming strategies for the future. But when human resource planning is done, it may not be possible to use such long-term strategies. Conditions keep changing, and HR can only make plans on the basis of short-term information. This incompatibility can become an obstacle to proper planning. It is necessary to put efforts into aligning the HR planning goals with that of the company.
4. Using Multiple Approaches
Every organization must have the required number of employees. They must also have employees with the qualities that are needed for the successful execution of various jobs. Sometimes there are differences of opinions on this matter between HR officials themselves or with others like the top management or department heads. While both these approaches are relevant for an organization, it is necessary that they are used correctly. All stakeholders must come to an understanding and use each approach where it is most suitable.
5. Lack Of Coordination
Coordination is vital for proper HR planning. The human capital management team depends on the support from various departments in deciding on the quantity and quality of employees required to achieve goals. The cooperation of the operations manager is vital for planning. But often, it is seen that many managers in the company are not in favor of coordinating with the HR departments for various reasons. There are many causes for the difference of opinion with the personnel department. These can come in the way of supporting those officials in proper HR planning.
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6. Not Knowing The Goals
Human resource planning is done with specific goals in mind. There can be both short-term and long-term goals for this activity. It is not only just about appointing or terminating people. HR planning involves the transfer of people to different departments. Training for employees forms a part of the plan. HR officials must clearly understand the purpose for which this activity is undertaken. Planning can be for different goals during different periods. A lack of understanding of these goals can derail the process. The process can go wrong and result in the wrong positioning of people.
7. Wrong Efforts
HR employees who are tasked with planning must have a deep understanding of the functioning of a company. Different firms function differently, and their manpower requirements will be different. When the organizational setup is not the same everywhere, the planning process and the techniques used cannot be similar. Copying a process from other companies or using technologies just because competitors use them can be the greatest obstacle to proper planning. HR officials must formulate a method that is unique to their firm and one that will suit perfectly.
8. Employee Resistance
Human resource planning happens on many occasions. When there is an expansion, this activity is undertaken. Even when there is a reduction in business and revenues are not up to expectations, there is a restructuring of staff members. This needs planning too. Mergers and acquisitions are events that warrant HR planning. During all these processes, employees are likely to be shifted to other departments or lose their jobs. Some may also see themselves rise to higher positions. Because of this uncertainty, there is resistance from workers for manpower planning, and this can be an obstacle.
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9. Cost And Time
Planning employee placements can be a time-consuming process. The experts must consider both the short-term and long-term impact of changes in employee strength and positions. In companies where the human resource department has fewer members, it could take them away from regular work. Employers can fear that their normal work will be disturbed and resist planning activities. Planning is good only if it is implemented. Implementation can be expensive if it involves hiring new people and promoting existing ones. This is another reason for business owners to resist HR planning.
10. Fear Of Uncertainties
Despite using the latest analytical technologies, planning can go wrong due to various uncertain factors. Fluctuating trade cycles and market conditions can upset the operations of a company. If employees are hired as per plans and revenues drop suddenly, the company may find itself struggling to pay salaries. Manpower turnover is another factor. Fast turnover of employees can force HR officials to drop long-term plans and resolve to manage contingencies. They may not be able to execute what they have planned. Such fear of uncertain factors can prevent personnel managers from attempting to do HR planning.
11. Lack Of Modern Technology
Not all companies have the latest HRIS packages. This can be a hurdle for the collection of accurate information. Without such information, HR managers cannot know the exact nature of all employees or their skills. They will not have data about which employees are compatible with which department heads. This is crucial information that is needed when moving people from one area to another. Precise information about which department suffers the most employee attrition is crucial for proper planning. This may not be available in the absence of HR software. This can be a barrier to attempting HR planning.
It is not possible or appropriate to drop human resource planning altogether because there are so many barriers to formulating and implementing it. Those in charge of HR management must look for ways in which planning can be made successful. Here are some ideas that can help to make this process a success.
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Guidelines To Successful Planning
1. Organize Well
Manpower planning is not something that can be done hastily. It must be a well-thought-out process that is done using people who are proficient in it. Personnel managers must select a group of officials who have in-depth knowledge about the company and its functioning. A separate committee must be created to do the planning. They must coordinate with different departments and complete the procedure successfully.
Firstly the HR experts must assimilate all information about employees and their skills. They must see who will give the best results in each position. Such an analysis must be done before starting the planning process. Further, the human resource officials must understand the employee numbers and placements in competing companies. This will give an idea of how to make this process a success.
2. Support From The Top
Human resource planning requires people and money. It is a process that needs a dedicated team to be set up. This team must work out all the details before finalizing the plan. It is also a process that requires money. If the plan must be put into practice, there may be a need for more employees or promoting some of them. This needs extra funds. Both people and funds can be sourced only with the top management’s permission.
HR managers must put up their planning process and its need to the bosses. They must convince the top management about the need for proper HR planning and how it will benefit the company. The improvement in efficiency and the subsequent cost saving must be explained, so that company owners understand the need for the exercise. Once HR managers receive support from the top, the work becomes much easier.
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3. Get Adequate Information
Accurate information is key to the success of any operation. Employee panning is no different. Without proper information, it is not possible to plan the placement of workers. The information must come from both inside and outside. Past information about employee movement and turnover must be analyzed to understand if there are any jobs where workers will not stay for long. Such information is crucial for planning.
Market data is also very important. HR officials must take the help of sales and marketing departments to know the market trends. If there is going to be a decline in the demand for the company’s products, then there can be a drop in revenue. This can affect the planning process. Depending on the growth rate of the company, employee requirements will change.
4. Customize The Plan
Every company is different in its objectives and way of functioning. Even companies in the same industry don’t have similar goals. Some may be looking to expand to new areas, while other firms may try to add new customer segments. This means that the skills and capabilities needed will also be different. The mix of employees must be tailor-made for each company, and this necessitates planning also to be unique.
Those in charge of HR management must make a plan that is customized to suit their firm’s requirements. The plan must be in line with the company’s objectives. It is necessary to have workers with skills that will help in achieving such objectives. Personnel managers must formulate a plan to ensure that suitable employees are available in every department to meet its goals.
5. Make Timely Plans
A company that is starting its operations will have a different requirement from one that is already established and functioning well. An expanding organization will have a need for employees at the various locations they are planning to set up their new offices. Mergers will have different employee requirements. When a company introduces a new item, there may be a need for new employees experienced in that product. Every situation has a different need.
An HR manager must stay updated with the company’s position and what its requirements are. The official must know if there is any change in the objectives of the company. According to this, the planning for human resources will also change. Plans must be made to suit a particular period. One cannot recruit for all times. Human resource departments must know what their bosses are planning and what would be the employee requirements.
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6. Participation Of Managers
One of the critical factors in human resources planning is the participation of line managers. They are the ones who are on the ground and will know the requirements of every department. They will know the skills that are required for achieving the company objectives. These officials also know their teams very well and can precisely tell which worker is good in what skills. Such knowledge is crucial for HR planning.
HR managers must take these managers into confidence and convey the information they seek. Such details are available with the line managers, and they will gladly help senior management in this matter. The team leaders are also essential to implement HR plans and make sure employees are following the new plans and changes in their duties without any resistance.
7. Make Plans Flexible
Market situations are changing very quickly. This will require companies to also have capabilities that are relevant at that particular time. It is not just market situations that change. Even internal employee positions can change. The sudden drain of employees to new companies can create a necessity for restructuring. If a company is not able to suddenly fill up the vacancies, it may need to move employees to suitable positions to ensure that critical jobs are completed.
Internal changes can happen in other ways too. If there is a drop in profitability due to raw material prices, then the firm may be forced to have a rethinking about its product mix. This will demand the appointment of people who are familiar with the new products and their production. Even the marketing team will need new members. Such flexibility in the plan must be built-in to take care of rapidly changing situations.
8. Have A Focused Approach
Human capital management can be effective only when there is a focused approach to planning. Personnel managers must consider both the qualitative and quantitative requirements of manpower to achieve company goals. While considering manpower requirements, they must look at skills that are needed. HR officials must try to upskill existing workers to satisfy the capability needs.
Instead of focussing on adding new employees alone, there must be an in-depth study about how the changing needs of a company can be satisfied using employees that are already present. Recruiting new employees is expensive. A high employee turnover can affect a firm’s reputation.
HR planning is not given much importance in many firms as unions object to this activity. There is a general feeling that this procedure is aimed at reducing manpower. Such views should be changed by human resource officials, and planning should be brought in as a regular exercise.
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