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H U ~ I ; ~Resource

II
Planning

Planning the necessary programmes of recruitment, selection, training, development,


motivation, and compensation so that future manpower requirements will be met.
Human resource planning is a double-edged weapon. If used properly, it leads to the
maximum utilisation of human resources, reduces excessive labour turnover and high
absenteeism: improves productivity and aids in achieving the objectives of an organisation.
Faultily used, it leads to disruption in the flow of wcrk, lower production, less job satisfaction,
high cost of production and constant headaches for the management personnel. Therefore,
for the success of an enterprise, human resource planning is a very important function,
which can be neglected only at its own peril. It is as necessary as planning for production,
marketing, or capital investment.
For an individual, it is important because it helps him to improve his skills and utilize his
capabilities and potential to the utmost. For an organisation, it is important because it
improves its efficiency and productivity. It is only through initial human manpower planning
that capable hands are available for promotion in the future.
In simple words, Human Resource Plani~ingis undcrstdod as the process of forecasting an
organisation's future demand for, and supply of the right type of people in the right numbers.
It is only after this that the HRM department can initiate a recruitment and selection
process. HRP is a sub-system in the total organisational planning. Organisational planning
includes managerial activities that set the conlpany's objectives for the future and determine
the appropriate means for achieving those objectives. HRP facilitates the realisation of the
company's objectives by providing the right type and the right number of personnel. HRF',
then, is like materials planning that estimates the type and quality of the materials and
supplies needed to facilitate the manufacturing activities of the organisation. HRP is also
called manpower planning. personnel planning or employment planning.
A few definitions of HRP are worth quoting here:
1) HRF' "includes the estimation of how many qualified people are necessary to carry
out the assigned activities, how many people will be available, and what, if
anything, must be done to ensure that personnel supply equals personnel demand at
the appropriate point in the future."

2) "Specifically, human resource planning is the process by which an organisation


ensures that it has the right number and kinds of people, at the right place, at the
right time, capable of effectively and efficiently completing those tasks that will
help the organisation achieve its overall objectives. Human resource planning, then,
translates the organisation's objectives and plans into the number of workers
needed to meet those objectives. Without a clear-cut planning, estimation of an .
organisation's human resource need is reduced to mere guesswork."
The manpower plan is a part of the corporate plan. Without a corporate plan, there can
be no manpower plan. If there are several imponderables and unpredictables in the
corporate plan, there will be difficulties in manpower planning. Whether or not the
manpower plan meets the requirements and is in tune with reality depends on clarity in
goals and validity of the stated assumptions. The other important point is the time
frame in defining the 'future'. In manpower planning, the future can be classified into
three periods: (a) the short-range or immediate future; (b) the mid-range; and (c) the
long-range future.
None of these three can be spelt out in terms of set number of days, months or years.
The "immediate future" may refer to the current situation and experiences and even
concern issues such as overtime and replacements. If there has been previous planning
for manpower, the plans may serve as a guide in the immediate future. If not, a
beginning should be made at orrce.
The mid-range future has a different time span in various companies. It can be as short
as a few months or as long as several years. Perhaps, most would agree that 2-3 years
period as a mid-range.
The loug-range could be 5 years, while 10 to 15 years span could be used for a
perspective plan. Long range plans must be made on the basis of various trends in the
economy and in the labour market, and on long-term trends of production in the
company. Long-range plans are general rather than specific, flexible rather than rigid.

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Nevertheless, a plan can be extremely useful in identifying factors and trends that need
to be reckoned with for early warning of possible problems. The long lead time
provides the opportunity and resilience to meet exigencies and make necessary
adjustments. More complete plans can be had as time slowly brings the long-range into
short-range.
Activity 1

As part of this activity you are required to identify and tabulate the number of
personnel ;it various levels and departments in your organisation. Compare your
tabulation with the levels of personnel mentioned in the manpower plan of your
organisation. Are there any major differences? Please find the reasons.

2.3 OBJECTIVES OF HUMAN RESOURCE PLANNING


Human resource planning is deemed necessary for all organisations for one or the other
of the following reasons:
i)

To carry on its work, each organisation needs personnel with the necessary
qualifications, skills, knowledge, work experience and aptitude for work. These are
provided through effective manpower planning.

ii) Since a large number of persons have to be replaced who have grown old, or who
retire, die or become incapacitated because of physical or mental ailments, there is
a constant need for replacing such personnel. Otherwise, the work would suffer.

iii) Human resource planning is essential because of frequent labour turnover which is
unavoidable and even beneficial because it arises from factors which are socially
and economically sound such as voluntary quits, discharges, marriage, promotions;
or factors such as seasonal and cyclical fluctuations i n business which cause a
constant ebb and flow in the work force in many organisations.
iv) In order to meet the needs of expansion programmes (which become necessary
because of increase in the demand for goods and services by a growing population,
a rising standard of living-which calls for larger quantities of the same goods and
services as also for new goods; the competitive position of firm which brings it
more business arising from improvements effected in the slump period; and the rate
of growth of the organisation), human resource planning is unavoidable.
v) The nature of the present work force in relation to its changing needs also
necessitates the recruitment of new labour. To meet the challenge of a new and
changing technology and new techniques of production, existing employees need to
be trained or new blood injected in an organisation.

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vi) Manpower planning is also needed in order to identify areas of surplus personnel
or areas in which there is a shortage of personnel. If there is a surplus, it can be
redeployed; and if there is shortage, it may be made good.
The objective of human resource planning is to maintain and improve the organisation's
ability to achieve its goal by developing strategies that will result in optimum
contribution of human resources.
The objectives of manpower planning are mainly:
a) To ensure optimum use of human resources currently employed

Human Resource Planning

Human Resource Planning

b) To assess or forecast future skill requirements


C) To provide control measures to ensure that necessary resources are available as and
when required
d) A number of specific reasons for attaching importance to manpower planning and
forecasting exercise are to:
link manpower planning with organisational planning
determine recruitment levels
anticipate redundancies
determine optimum training levels
provide a basis for management development programmes
cost the manpower in new projects
assist productivi tiy bargaining
assess future accommodation requirements
study the cost of overheads and value of service functions
decide whether certain activities need to be subcontracted, etc.

1.4 HUMAN RESOURCE PLANNING PROCESS


The manpower plan influences the corporate strategy and is in turn influenced by it.
The manpower planning process may incorporate all the stages shown in Fig.l.1. The
planning process may not always give exact forecasts. To be effective it should be a
continuous process with provision for control and review.
The first step in the manpower planning process is the establishment of a planning
horizon. One should know the period for which the manpower plan will apply. Then,
the specific corporate objectives and strategies should be clear. Based on these,
estimates or projections for demand and supply manpower can be made using the
approach and methods suggested in the next unit. The difference between the estimates
of demand for and supply of maupower is often referred to as the 'manpower gap' and
one of the main components of the manpower strategy is to formulate plans for closing
it-perhaps by recruitment and training (if the demand is positive, i.e., demand exceeds
supply) or by planned redundancy (if the gap is negative).

1.5 PROJECTING MANPOWER SUPPLY AND DEMAND


AT ORGANISATIONAL LEVEL
The paradox in manpower projections is that while the techniques are easy and simple,
applying them successfully is enormously complex and difficult. Manpower projections a e
not an academic exercise or an end unto themselves. Their value lies in extending the range
of other phases of manpower planning and, indeed of planning for other company functions.
Forecasts of manpower supplies and demands are of two types, estimates and
projections. Estimates are educated guesses based on experience while projections are
mathematical extensions of data on manpower into the future. Most forecasts involve
both projections and estimates.
Forecasting Techniques

We shall now attempt to look at the aspect of.forecasting future requirements. This can
be done through various techniques.
The process of estimating manpower demand consists of four steps:
an approach
a basic factor
a method
a technique

Human R g o u m Planning
Company Objectives and Smegic Plms

Forecasts

1 Manpower

Production
Objectives/Processes

Capital/
Finance Plans

AniiJySlS
(Current
Situation)
Inventory
Eqloyment
Prdductivity
Organisation

Manpower Forecasts
(Future Situation)
Overall
Manpower
Forecast

Unit
Manpower
Forecast

Budget
Agreement

Management
Manpower
Estimates

uManpower Objectives
and Policies

Phase I1

Manpower Plans and Programme


Recruitment and Selection
Career Planning
Appraisal & Development
Training
Efficiency Investigation
Retirement Replacement
Redundancies

Phase In

Fig. 1.1: The Manpower Planning Rocese

Approach
There are eight possible approaches:
1) Subjective

2)

3) Global
5) Techno-economic
7) Deterministic

4) Component
6) Non-economic
8) Probabilistic

Objective

The order in which they are mentioned suggests the formation of four groups, each of
which comprises two mutually exclusive approaches e.g. (i) Subective or Objective,
(ii) Global or Component etc.
The groups, between themselves, are not quite mutually exclusive.
A subjective approach to manpower demand estimation uses intuition, impression or
judgement. Opposed to this, the objective approach tries to justify the estimate of
demand on the basis of certain factors or logical explanations.

A global approach would try to estimate manpower demand as an overall figure,


directly for the entire problem under consideration, whereas a cwponent approach
would first estimate the demand for segments of the problem and then aggregate it.

Human Resource Planning

The techno-economic approach ccmbines the technological, economic and organisational


considerations mentioned earlief, whereas the non-economic approach utilises only
socio-political and other considerations.
Basic Factor

A basic factor means a variable to which manpower demand can be related. The choice
depends upon the number of considerations which together constitute the multidimensional framework of the particular problem facing us.

Methods
According to Gareth Steiner, statements about the future can be made in two senses:
What will occur?
What should occur?

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According to Steiner, what is more significant than the time element is the way in
which the change in one phenomenon i.e. manpower, is associated with change in
another (basic factor, which was mentioned earlier).
The rate at which the change takes place exerts an influence on the frequency of
measurement and forecasting required and affects the need for different kinds of
feedback. Ln practice, what managers see as desirable will be influenced by past
experiences. All these assessments involve making assumptions about managerial
capacity, manpower utilisation or the rate of change in manpower.
According to Steiner, the major advantages of manpower forecating are:
a) It corresponds to the way managers commonly think and talk about manpower.
b) It encourages the recognition that, even where output is not readily measurable, we
can still make good forecasts of manpower, provided we can quantify work done in
some way.
c) It highlights the way in which we have to control the effect by other inputs such as
capital on manpower requirements.
Techniques

In this context therefore, one can outline a few specific techniques of manpower
demand forecasting.

Subjective
The forecast here is made on the basis of estimates by experienced people whose
experience has taught them what types of changes are important and the rates of change
involved. Implicitly however, subjective techniques involve subjective estimation of
workload and manpower utilisation and their rate of change.
The advantage lies in that the data collection is required and intangible factors like
social opinion, fashion, etc. can be built in. However, the disadvantage lies in the errors
of the human mind which can be perpetuated while carrying out the exercise of demand
of estimation for manpower. Forecasts based entirely on subjective assessment are
unlikely to give very good results. However, supplementing objective techniques with
subjective estiamtes can be useful e.g. through using subjective probabilities.

Erne Series Analysis


The time series extrapolation is a good method where it is sometimes not possible to
take an overall view of a group of staff, to base a forecast on estimates for workload
and manpower utilisation.
There are four elements of the time series method:
Trend (T,)
Cyclicat effect (C,)
Seasonal effect (SJ

Random effect

R)

These veing multiplicative, we can get:


V l = T l x C, x S, x R l
Projections or extrapolations can be done on the basis of moving averages or
exponential smoothing.

Work Study Method


The work study technique uses time and motion studies to analyse the work being
done. This method is useful for repetitive jobs which have a high degree of manual
content and where job methods do not change frequently.

Accuracy of Techniques
No method of forecasting can be entirely without error. Some changes are unique (such
as new legislation or a decision to close down an establishment) and hence are more or
less unpredictable as to timing. Such errors as are due to these unique changes are
unavoidable. There are also errors that are partly avoidable since they stem from
inaccurate information or inappropriate techniques. Even where errors are theoretically
avoidable, it unrealistic to expect more than a proportion of error to be actually
avoidable.
However, a forecast, or any resulting objective, must be modified as soon as it seems
that it no longer represents the most likely occurrence. Unfortunately, the poeple
become emotionally attached to forecasts. We must remember, however, that errors have
a cumulative effect over time.
Taking the above factors into consideration, a corporate approach to manpower planning
is to be developed. In doing so certain key considerations such as the following
emerge:
a) What positions and individuals are to be included in the planning effort? A simple
rule of thumb is to include all positions which are critical to corporate performance
and profits and/or pose recruitment poroblerns.
b) What is the appropriate manpower planning horizon? Experience shows that it can
extend up to 4 to 5 years. Beyond 5 years, technical manpower forecasts have
doubtful value due to pervasive imponderables and unpredictables in the
environment. Within the planning period, there should be a formal method of
review and assessment at least once every year.
c) With what business factors will manpower needs be related? For a company
producing fertiliser, it could be tons of fertiliser, for an automobile unit, it could be
the number of cars and trucks. For a retailer, it could be the rupee value fo sales.
To be useful, the predictor should meet at least two requirements: (a) it should be/
directly related to the essential nature of the business; and (b) changes in the
selected factor be proportional to changes in the manpower required.
Selecting a Proper Predictor

For instance, while relating manpower needs with rupee value of turnover, appropriate.
indexation for inflation is called for. Multi-product firms need to evolve appropriate
conversion factors to have a common base. Alternatively, they can have separate
forecasts for each of the products, particularly if the products differ not only in terms
of numbers required, but also in the types of skills needed. Some firms find it
necessary to select several factors, one for each of different segments of the work force.
In a refinery, for instance, production workers may be related to one factor, the sales
force to another, management to a third, and the professional work force to still a
fourth.
Firms which build up complete sets of historical records on various rela.ted aspects can
make quite accurate projections against those which lack adequate data base. Now firms
rely on the existing norms in the industry and make adjustment for the unique features
of the f m s vis-a-vis the other firms in the industry on such aspects as technologies,
management culture, compensation, etc.

Human Resource Planning

Human Resotme ~ l d n g

Simple arithmetical projections b-sed on historical data may lead to disastrous


consequences. While using historical data for projections due regard should be given to
change in plans and programmes, technology, environment, etc. The staff specialists in
manpower planning would do well to seek the assistance of experienced operating
managers to interpret reasons for past changes or anticipating future changes.
Projections for Particular Groupa of Employees

As already mentioned, total manpower needs of an organisation can be built up from


projections made for specific segments of their work force. Different work groups relate
differently to various predictors and thus have different productivity ratios. In each case
the following process is followed: find the appropriate business factor, draw up the
-- historical record of that factor in relation to manpower employed, compute the
productivity ratios, determine the trend, make the necessary adjustments in the trend, past
and future, and project to the target year.
Organisations may adopt a functional framework by viewing positions according to
functional activities than by grouping them into separate organisational units. The
purpose of grouping positions similar in content, regardless of their location in the
organisational structure is to recognise that each of these different groups of jobs
require different knowledge, skills and characteristics and are involved in different
career ladders. Such knowledge about different groups in itself is useful. Experience
shows that in any organisation 6 to 12 job or skill groups would meet the major
activities in all functional areas.
Some firms develop the total projection for the work force at the operating level and
work out the projections at various responsibility levels in each joblskill group by
means of ratios. Firms may discover a stable relationship between the total number of
worlanen and foremen. Depending upon the number of levels in hierarchy-it usually
varies from 5 to 15-and assumptions about span of control, nature of work,
technology and historical data, projections are made.
Projectidg Labour Casts

Manpower projections emphasise the number of employees. But firms are interested in
the labour costs also. The share of labour costs to total costs range from about two per
cent in process industries to around 60 per cent in the nationalised coal industry. The
labour costs can be projected by examining the trends in labour productivity, proposed
change in work technology, union wage agreements, inflation, government rules, etc.
Some companies have been able to maintain the labour cost component in total cost
static over a period of say, five years, even though in the intervening period the
average emoluments of the employees have gone up by onethird. C o m p a n i ~like ITC
Ltd. and Premier Automobiles Ltd. could do this through productivity bargaining as part
of wagenegotiations whereby workers will not only get more than what they were
earning before, but also turn out higher levels of performance. In such companies, it
becomes possible to produce more output than before with the existing manpower.
Projecting the Source of Supply

Projecting the number, type and level of employees tells only half the story in
manpower planning. Every organisation will have two major sources of supply: internal
and external. In unionised firms, up to a level, agreements determine the ratio of
external and internal sources of supply.
Internal Sources: Proper manpower planning and information system enables the
organisation to know the profile of the employeesage, sex, education, training
experience, job level. performance, and potential.

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Manpower requirements arise out of growth or diversification or because of the


movement of the employees on account of transfer, promotion, job rotation, voluntary
retirement, resignation, retirement, dismissal discharge or death. In either case, as and
when vacancies arise, organisation can match the skill and level requirements with the
profile of the employees and meet the requirements. While some of the internal changes
and external supply could be predicted such as growth opportunities, transfer and
promotions, retiremknts, etc., others are not easy to predict. But, as elsewhere, past
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experience and historical data may be of some help. The companies which have
. systematised personnel records and information systems and which have well
established career and succession plans find it easier to project internal sources of
supply relatively accurately.

External Sources: When the company grows rapidly, diversifies into newer areas of
operations or when it is not able to find the people internally to fill the vacancies, it
has to resort to outside recruitment. To the extent a firm is able to anticipate its outside
recruitment needs and scans the possible sources of supply with a feel for the labour
market conditions, its problems in recruiting the right number with right skills in the
right time would become easier.
If both supply and demand projections are made in time or if there are any problems
such as shortage of skills, appropriate steps can be taken to overcome them. For
example, several companies started apprentice training programmes when they predicted
a shortage for certain types of skills. When major manufacturing projects are planned tp
be located in hitherto backward areas, such problems are felt more acurately. For
instance, there is the case of paper mill in the eastern region not being able to reach
even 10 per cent capacity utilisation, several years after it was commissioned, because
of shortage of people with appropriate skills to run the paper mill.

Accuracy of Projections
The accuracy of the projections is based on the following factors:
a) The predictability of the industry, i.e., whether the business conditions are generally
stable or not.
b) The degree of integration on manpower planning with other company planning
efforts, and the amount of experience that the company has with all types of
planning. If a company plans very far into the future, it may be sacrificing
accuracy and flexibility.
c) Historical data about manpower levels and about the selected business factors with
which manpower projections are related. Even the experience of operating
managers is not useful in making projects and estimates in the absence of good
manpower records. The projections, at best, can be as good as the data base.
d) The knowledge, experience and outlook of the operating managers. When
manpower projections are made as part of the total planning process, even when
the forecasts are not accurate, they atleast succeed in providing warning of possible
problems.
e) The framework for manpower utilisation for the forecast period.

Activity 2
Visit a hospital, you have known or access to and do the following:
a)

Assess and identify the objectives of manpower planning in the hospital.

b)

Identify the critical areas and the extent of manpower shortages and the reasons
for such shortages.

c)

Identify manpower surpluses and reasons thereof.

d)

Identify and fix forward targets for manpower development.

e)

Identify the major manpower problems and their causes and interrelationship.

Human Resource Planning

Human Resource Planning

1.6 DEVELOPINGMANPOWER STRATEGY: KEY


CONCERNS
In this section certain key concerns in developing manpower strategies are briefly
considered.

Approach
While assessing future requirements, the estimates depend mostly upon the nature of
manpower assumptions in the organisation. Corporate strategy can influence manpower
strategy and vice-versa. Here we may consider three approaches: the zero budgeting
approach, the ideal, and the realistic.

Zero budgeting, as the name implies, is an approach in which one forces unitldivision
managers to justify their total operation iiom zero. The objective is to encourage
managers to seriously think about their current activities. Given the restrictions posed
by law and unions, the practicability of this approach for ongoing organisations in
manpower planning is doubtful.
It is only new units that can start thinking about manpower planning in terms of what
might constitute an 'ideal' approach. Arry decisions on sub-contracting, off-loading
some functions like maintenance produc:tion-tr:chnology, etc., may depend on the
perceived notions of what constitutes arb ideal for the organisation.
Organisations can proceed on a realistic approach using existing information. A
company which operates on a three-year planining cycle may record manpower levels
in subunits or division in such a way that it i s easy to monitor and hold managers
responsible (see Fig. 1.2). Organisations whic h choose to supplement manpower plans
with different business parameters and manpc Iwer ratios. (e.g. gross value added per
employee, capital employed per employee) hi nve to be varied about the fact that the
future may not follow the past and ajustment s may have to be made for variations.

Item

Current yea a
Year 1

Forecast

Forecast

Year 2 ,

Manpower increases

Business Activity
Capital Expenditure
Takeoverlmerger
Manpower decreases

Business activity
Capital expenditure
Disinvestment
Productivity improvement
Fig. 1.2: Mon:itoning Manpower Levels

Personnel Policies Affecting Manpower Siupply


Manpower supply in undertaking is affecte .d by the personnel policies ranging from
recruitment to retirement. As shown in Fig. 1.3, manpower flows in and out of an
organisation due to a variety of reasons. Policies affecting each of these aspects need
to be reviewed regularly to assess their possible effects on manpower supplies to meet
the gap between supply and demand.

Strategic Decisions Affecting Manpol ver Demand


Organisations operate in a changing en ~vironment.Therefore, they do not remain static.
Manpower structures also do not rema in static. Questions on the activities and roles of
persons at different levels and studies on organisation and methods of work may
provide useful insights and opportunit ies to revise manpower structures that change the
estimates about manpower required.

Promotions out

Human Resource Planning

4
Transfers in

Transfers out

-p

Retirement
Voluntary Retirement
Discharge/Dismissal/
Termination
Resignations
Redundancy1
Retrenchment

Fig. 1.3: Forces of Manpower Flow in an Organisation

Change in production methods, union agreements on productivity, off-loading


maintenance, sub-contracting, etc. are some of the strategic decisions that help
organisations to significantly alter their manpower needs without affecting the volume
of business.

Personnel Information Systems


Most organisations do not have adequate information on manpower. Several of those do
not have proper retrieval systems. There are understandable difficulties in resolving the
issues and complexities in design, definition and creation in computerised personnel
information systems for effective manpower planning and utilisation. Even the current
technologies and knowledge in this respect is not put to use optimally. This is strategic
disadvantage.

Activity 3
Managing a largelmedium size hospital with special setting of the environ'mental
factors of developing countries and the great demands placed on the hospitals by the
public, make it essential for the hospitals to take whatever measures possible to see
that its effectiveness is demonstrated to the greatest possible extent. This involves
careful planning of various activities of the hospital.
Based on the contents discussed in this unit do the survey of hospital to understand
manpower planning and prepare brief, notes broadly on the lines given below:

1)

Hospital manpower situation report on existing manpower and services.

2)

Manpower requirements, availability and distribution a t various levels.

3)'

Future supply of manpower from training schools and institutions

4)

Mismatches between supply and requirement

5)

Solving mismatches

6)

Organisational and managerial problems

7)

Manpower strategy and outline plan

8)

Detailed plan

9)

Implementation of the plan.

10) Monitoring

1.7 LET US SUM UP


Manpower planning affects organisation strategies and vice-versa. We have reviewed the
concept of manpower planning and studied the objectives and reasons for current
interest in the subject. There are three stages in manpower planning process. We
examined the techniques and special problems of manpower supply and demand at
organisational level. Finally, we have considered certain key concerns in developing
manpower strategies.

1.8 SELF-ASSESSMENT TEST


1) What is the purpose of manpower planning? Explain the process.

2) Examine the reasons for the current interest in manpower planning.


3) Briefly review the forecasting techniques.

1.9 FURTHER READINGS


Beach, D.S. (1967), Management of People at Work.
Bennison, Malcolm a d Jonathan Casson (19831, The Manpower Planning Handbook,
McGraw-Hill: London.
Edwards, John et al. (1983), Manpower Planning, John Wiley, New York.
Flippo, E.B. (1980), Personnel Munagernent, Fifth edition, p. 110.
Mammoria, C.B., Personnel Management.
Wilbert and Schnider (1985), The Dartnell Personnel Administration Handbook,
Dartnell: Chicago.
Yoder, D. (1972), Personnel Management and Industrial Relations, p. 210.

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