Human resource planning is a four-step process designed to help an organization attain its goals by making full use of its workforce. The complexity of a human resource plan depends on various factors, including the work environment expected in the future, the duration of the plan, and the objectives of the organization. The four critical steps of human resource planning are:
1. Environmental Analysis
Environmental Analysis is defined as a “process to identify all the external and internal elements, which can affect the organization’s performance” (Pestle Analysis, 2015). From an HR perspective, environmental analysis requires looking at a variety of different external and internal factors. External elements that an HR professional should take into consideration include changes in employment laws or legislation, unemployment rate and trends, educational trends, technology, and trends within the industry. From an internal perspective, HR professionals should assess the skills of the current workforce, gaps in the skills necessary to achieve organizational goals, and the strategic plans of the organization. Environmental analysis is often achieved by conducting a SWOT (strengths, weakness, opportunities, threats) analysis. Some questions to ask throughout this process include:
1. What is going on with the world and the economies of areas where you operate? How will these trends affect your organization? How will they impact HR decisions? For example:
- What is the unemployment rate?
- What laws are changing that will affect your business? Are there other political concerns that will affect your business?
- In your local areas of operation, what trends are you seeing that will impact the organization?
2. What is going on in your industry, specifically? Is it growing? Where is your organization placed in the industry?
- Where does your organization fit when competing for talent? How scarce is talent right now?
- Are there technological trends that will impact your HR needs?
- What skills does your organization need to be competitive? Do your employees currently have these skills or what training (or hiring) will be needed?
- What trends are happening in the industry? Does your organization make trends or follow them? What changes will you have to make to remain competitive when it comes to attracting and retaining talent?
3. Who are your direct competitors? How are they changing? Who is new to the picture?
- How does your compensation and benefits structure compare to those organizations with whom you are competing for talent? What changes might be needed to continue to attract and retain talent?
4. From an organizational perspective, what is going on in the organization?
- What are the company’s strengths and weaknesses? How do these elements affect HR directly? What can HR managers do to address the weaknesses or capitalize on the strengths of the organization?
- What trends are you seeing that will impact HR in the next year, the next 5 years, and the next 10 years? What can you do to prepare (Miller, 2018)?
2. Scenario Planning
Scenario planning is described as the process where management evaluates and reviews possible scenarios the company may have to address in the future, mainly by making assumptions. To use scenario planning, there are four critical steps: identify driving forces (economics, politics, technology), identify critical uncertainties, develop a range of plausible scenarios, and discuss the implications (Mariton, n.d.).
When most people think about forecasting, they think about the future conditions of a particular environment – what will be needed as there are changes within the organization. In human resource planning, forecasting refers to the assessment of the current supply and demand for people and skills, and the use of that knowledge to determine the need for and availability of personnel in the future(AnderePrepsU, n.d.). In human resource planning, managers evaluate and assess the experience, skills, and attributes, relating to people, that will be required in the future. There are two different types of forecasting: demand forecasting and supply forecasting.
The most critical part of human resource planning, demand forecasting, is the process of estimating the number of future employees required, as well as the skills and competencies that will be needed. When demand forecasting, managers consider the long-term objectives of the organization as well as the available workforce, its productivity, and the available budget. With those factors in mind, they must decide whether the organization will need more or less of a particular skill or more or less employees. Summarily, demand forecasting enables managers to match the current workforce with the future demand of the organization. Managers can utilize different methods for determining the demand for employees in the future, including their judgment and experience as well as productivity statistics (AnderePrepsU, n.d.).
Supply forecasting is defined as the process of matching the current supply of employees, along with their skills and competencies, to the future demand of the organization. After the future demand is determined, managers, along with human resources, must develop a plan to match the demand by increasing or decreasing the supply of employees. One popular method that managers use in supply forecasting is succession planning. Succession planning is “the process of preparing employees for future jobs and deciding how management vacancies will be filled. The goal is to have highly trained replacements ready to fill vacant positions in all key jobs (AnderePrepsU, n.d.).”
4. Action Planning
After creating demand and supply forecasts, organizations should focus on the development of a sourcing strategy– how the company can utilize a variety of resources or methods to reach its desired human resource targets. Some methods may include increasing or decreasing the size of the workforce, investment in employee training and career development, or the utilization of software and technology. In the action planning process, it is important that decisions align and fit within the organizational strategic plan. An effective human resource plan will align with the goals of the organization, minimize costs for the company, and ensure maximum productivity among its employees. Once identified, the plan should be integrated into the organization’s day-to-day activities and monitored regularly. As with any plan, consistent follow-ups and evaluations are necessary to ensure optimal performance.
Failure to implement an effective human resource planning process can impact the organization in several ways, including high employee turnover, lack of competitiveness within the industry, a reduction in financial performance, lack of available resources, and a decrease in quality of services. A productive workforce equals better performance overall. Furthermore, organizations need to balance their demand for efficient workers with the availability of such talent in the market. An imbalance between the demand and supply of labor could, in turn, lead to the loss of an organization’s competitive edge. A talented workforce makes an organization valuable and high-performing. Inadequately planning how to acquire and retain such a workforce in different market conditions lowers the value of a company (AnderePrepsU, n.d.).