CHAPTER 5

Work Force Planning

CHAPTER OUTLINE

• Workforce planning
• Forecasting
• Quantitative Technique
• Qualitative Technique

LEARNING OUTCOME

• Meaning and need of Workforce Planning
• Strategy and WFP
• Models of Workforce Planning
• Forecasting Techniques

Workforce Planning is a process that organisations use to help them identify and address the staffing implications of business plans and strategies. By implementing this process, organisations can ensure that they will have the right number of people, with the right capabilities, in place at the right time. When implemented effectively, the process results in two major outputs: staffing strategies (which describe what will be done in the long term, across planning periods, to address critical staffing issues) and staffing plans (which describe specific, short-term tactical plans and staffing actions to be implemented in the near term-within a given planning period).

MEANING

Workforce planning (WFP) is a process designed to anticipate and integrate the human resources’ response to an organisation’s strategic plan. It is a systematic process for identifying, acquiring, developing, and retaining employees to meet the needs of the organisation. To have meticulous WFP, it is important to have effective leadership; clearly articulated vision, mission, and strategic objectives; and cooperative as well as supportive efforts of the staff. It is an inclusive process, drawing together programme management, strategic planning, budget, human resources, and programme staff. It involves collaboration and information sharing. Workforce planning is a management framework that ties human resource decisions to the organisation’s strategic plan. In this way, human resource decisions move away from piecemeal, individualized decisions and become part of the larger, more strategic goals of the organisation. Workforce planning provides managers with a framework for making staffing decisions based on an organisation’s mission, strategic plan, budgetary resources, and a set of desired workforce competencies.

To be useful, a workforce plan must reflect Organisational Culture and the management environment of the organisation for which it is developed. Workforce planning enables managers to identify the gaps in the existing workforce which need to be strengthened.

IMPORTANCE OF WORKFORCE PLANNING

Workforce planning has become critical process in last few decades, due to increased retirements, as well as retention and restructuring initiatives. The organisations need to identify the occupations with increasing turnover, the reasons of turnover and the impact of turnover on the skill sets. This helps organisations develop plans for stable staffing levels, succession planning, and skill development. An organisation needs adequate human resources to accomplish its mission. Because all employers compete for employees from the same labour pool, workforce planning is critical for attracting and retaining the talent.

Workforce planning enables organisation to:

• Formulate the strategy for the resource allocation in a manner which would facilitate the organisation to meet its goals.
• Prepare for contingencies that could prevent the organisation from attaining its goals.
• Strategize for the organisation’s growth and progress.
• Facilitate strategic business decision making.
• Anticipate workforce needs.
• Maximize organisational effectiveness by integrating the organisation’s mission, strategic plan, budget, technology, and human resource needs.

Benefit to management:

• Provides managers with a strategic basis for making human resource decisions.
• Facilitates managers to anticipate change rather than being surprised by events, and provides strategic methods for addressing present and anticipated workforce issues.
• Helps organisations to systematically address issues that are driving workforce change.
• Facilitates organisations to project retirement rates and make plans for replacing lost competencies and institutional knowledge.
• The overall benefit of workforce planning is its ability to make organisations more effective.

STRATEGY & WORK FORCE PLANNING

An organisation’s strategic plan leads the overall HR strategic plan. The strategic plan is a macro level set of directives that identifies how the organisation will achieve its mission and move toward its vision. Workforce planning offers a means of systematically aligning organisational and programme priorities with the budgetary and human resources needed to accomplish them. By beginning the planning process with identified strategic objectives, managers and their organisations can develop workforce plans that will help them accomplish those objectives. At the same time, these plans provide a sound basis for justifying budget and staffing requests, since there are clear linkages between objectives, the budget, and the human resources needed to accomplish them.

Planning initiates with the organisation’s strategic plan. Long term as well as short term goals of the organisation is constantly changing. Long term goals like expansion or cost reduction or the short term goal like meeting the increased demand, requires WFP. WFP offers a means of systematically aligning organisational and programme priorities with the budgetary and human resources needed to accomplish them.

An organisation’s human resource policies must be aligned with the mission, vision, core values, goals, and strategies by which the organisation has defined its direction and its expectations for itself and its people. Strategic planning sets organisational direction and measurable programme objectives. These goals and objectives not only provide the basis for determining necessary financial resources, but also provide the basis for workforce needs. Right people with the right competencies help in effectively achieving the organisation’s strategic goals and objectives. The workforce plan highlights the “people factor” in achieving results.

Workforce planning naturally complements and is a follow-up to strategic planning. Just as strategic planning helps an organisation outline where it is, where it is going, and how it plans to get there, a workforce plan lays out the specific tasks and actions needed to ensure the organisation has the necessary human resources to accomplish its mission.

A strategic plan charts the future with broad mission-related targets and milestones. An organisation’s vision, mission, and measurable goals and objectives drive the identification of what type of work needs to be accomplished. A workforce plan translates strategic thinking into concrete actions in the area of workforce staffing and training needs.

When an organisation successfully aligns human resource activities with organisational strategy, “activities fit strategically” and reinforces one another. This “strategic fit” produces several advantages. First, it produces consistency. Second, human resource activities will reinforce the organisation’s business strategy. Third, a good “fit” facilitates information exchange across activities. Last, strategic fit eliminates redundancy and minimizes wasted effort. Each of these activities reflects a fundamental decision made by the organisation to focus not just on living for today, but on preparing for tomorrow by investing in its people.

The managers are required to develop the Workforce plan in a manner that it helps in accomplishing organisational strategic objectives. At the same time, these plans provide a justification of budget and staffing requirements, since there is a clear linkage between objectives, the budget, and the human resources needed to accomplish them. WFP relates to the employees and employee skill sets needed to accomplish the organisation’s goals. As WFP addresses staffing implications of strategic and operational plans, it affects all the other HR Processes from hiring to firing and also retaining. WFP should also take into account other human resource processes such as succession planning, employee development, career ladders, and organisation development. Each has a part to play in identifying critical skills, forecasting potential vacancies, and preparing employees and the organisation to meet future needs.

Strategy development involves the collaborative work of the department and its strategic partners to develop strategies to address future gaps and surpluses. The forum for this strategic work is the workforce planning meeting, and other continuing, as-needed meetings and communication throughout the year. There is a wide range of strategies that organisations might employ to attract and develop staff with needed competencies. Likewise, there is a myriad of factors that will influence which strategy, or combination of strategies, should be used. Some of these factors include time, fiscal constraints, resources, internal depth, workplace and workforce dynamics, and job classifications. Strategies may include modifying positions, flexibility in hiring within the pay range, defining training and development needs, defining diversity initiatives, conducting specialized recruitment efforts, developing retention and productivity techniques, effecting reorganisations, and updating class specifications. The action plan should be developed first around the most critical gaps the organisation faces so that human resources can support strategy.

 

A STRATEGIC WORK FORCE PLANNING MODEL

There is no single approach to developing a Human Resources Strategy. The specific approach will vary from one organisation to another. This approach identifies six specific steps in developing an HR Strategy:

1. Setting the strategic direction
2. Designing the Human Resource Management System
3. Planning the total workforce
4. Generating the required human resources
5. Investing in human resource development and performance
6. Assessing and sustaining organisational competence and performance

The six broad interconnected components of this system consist of three planning steps and three execution steps.

The top three components represent the need for planning. Organisations must determine their strategic direction and the outcomes they seek. This is usually accomplished with some form of strategic planning. Classic strategic planning is a formal, top-down, staff-driven process. When done well, it is workable at a time when external change occurs at a more measured pace.

However as the pace and magnitude of change increases, the approach to strategic planning changes substantially:

• First, the planning process is more agile; changes in plans are much more frequent and are often driven by events rather than made on a predetermined time schedule.
• Second, the planning process is more proactive. Successful organisations no longer simply respond to changes in their environment, they proactively shape their environment to maximize their own effectiveness.
• Third, the planning process is no longer exclusively top-down; input into the process comes from many different organisational levels and segments. This creates more employee ownership of the plan and capitalises on the fact that often the most valuable business intelligence can come from employees who are at the bottom of the organisational hierarchy.
• Lastly, the strategic planning process less reactive and more driven by line leadership.

Once strategic planning is under way, a process must be undertaken by the organisation to design and align its HRM policies and practices to provide for organisational success. The remaining step in planning is to determine the quality and quantity of human resources the organisation needs for its total force.

The rest of the HR strategic system exists for and is guided by these plans, policies, and practices. These execution components contain mechanisms that generate the correct skill sets, invest in staff development and performance, and productively employ them in the organisation. The last component provides a means to assess and sustain the competence and performance of the organisation and the people in it with regard to outcomes that the organisation seeks.

Setting the strategic direction

This process focuses on aligning human resource policies to support the accomplishment of the Company’s mission, vision, goals and strategies. The important element is to know whether the organisation’s internal capability can deliver the organisation’s business goals.

Many organisations cite their people as their primary source of competitive advantage. Successful companies continuously identify and adopt innovative human resource management policies and practices to sustain that advantage. More importantly, they structure work and design training, performance management, pay, and reward policies to help members of the organisation succeed in achieving desired organisational outcomes. In other words, they integrate and align HRM policies and practices to reinforce employee behaviours that can best realize the leaders’ strategic intent. In the most successful companies, the set of policies and practices that collectively make up a company’s HRM system is the critical management tool for communicating and reinforcing the leaders’ strategic intent.

The identification of critical workforce issues is one of the most important steps in the strategic staffing process. To define critical workforce issues, it is necessary to understand the longer-term business context and define the workforce issues to be addressed.

Many a times, business strategies describe very specific changes that are to be implemented; often, these changes have an impact on required staffing levels, required capabilities, or both. Such changes include:

• Changes in business focus, objectives, or activities
• Business expansion or contraction
• Changes in markets or customer base
• Major projects or capital expenditures
• Changes in technology
• Changes in product mix
• Productivity improvements and cost containment efforts
• Changes in competitive positions
• Changes in organisation structure

Specific Staffing Issues Driven by Business Changes

Designing the Human Resource Management System

This stage focuses on the selection, design and alignment of HRM plans, policies and practices. Various options may be open to the organisation such as drawing on industry best practices.

Emerging HRM policies and practices range from outsourcing certain non-core functions, adopting flexible work practices (telecommuting, work from home) and the increased use of information technology. Not every industry trend may be appropriate for a specific organisation. In addition, it is essential that a cost-benefit analysis of implementing new HRM policies and practices be undertaken. For example, the costs (monetary and in allocation of resources) of implementing a new job grading system may outweigh the benefit of such an undertaking. There may be more cost-effective alternatives available to the organisation at this point in time.

Particular HRM policies and practices may be necessary to support strategic organisational objectives, such as improving the retention of women in the organisation or promoting diversity, especially the representation of designated groups amongst senior management.

A good approach in selecting the appropriate HRM policies, procedures and practices is to identify the appropriate HRM practices which support the organisation’s strategic intent as it relates to recruitment, training, career planning and reward management.

Planning the Total Workforce

Determining future business requirements, especially those relating to manpower requirements, represents one of the most challenging tasks facing human resource practitioners.

The development of a workforce plan is a critical component of any human resource strategy and one of the expected outcomes of human resource practitioners’ activities. Despite this, manpower or workforce planning, as well as succession planning, has only recently enjoyed a resurgence in popularity. To some extent this has been prompted by the need to develop employment equity and workplace skills plans and set numerical employment equity targets. The failure of many organisations to develop and implement workforce planning is rather indicative of the lack of strategic planning itself.

Workforce planning is a systematic process of identifying the workforce competencies required to meet the company’s strategic goals and for developing the strategies to meet these requirements. It is a methodical process that provides managers with a framework for making human resource decisions based on the organisation’s mission, strategic plan, budgetary resources, and a set of desired workforce competencies. Workforce planning is a systematic process that is integrated, methodical, and ongoing. It identifies the human capital required to meet organisational goals, which consists of determining the number and skills of the workers required and where and when they will be needed. Finally workforce planning entails developing the strategies to meet these requirements, which involves identifying actions that must be taken to attract (and retain) the number and types of workers the organisation needs.

A workforce plan can be as simple or as complex as the organisational requires. Workforce planning can be conducted for a department, division or for the organisation as a whole. Whatever the level or approach being adopted, it must nevertheless be integrated with broad-based management strategies.

In addition to workforce planning, ensure that organisational structure and jobs ensure the efficient delivery of services and effective management of the organisation as a whole.

Identifying current workforce dynamics is a critical step in the development of an HR plan. A skills inventory is a computerized or manual system designed to take stock of information about current employees’ experience, education, compensation history, and/or unique abilities.

As an alternative or complement to the skills inventory, a human resource audit is a systematic examination and analysis of an organisational workforce in an effort to create an understanding of the current staffing situation. The HR audit compares the past with the present labour specifications to identify trends and patterns in multiple aspects, including turnover, training, absence, and diversity. An HR audit can identify key information about HR operations, including how well they work, and where improvement may be needed. It is an extremely useful tool in HR planning.

Generating the Required Human Resources

This process focuses on recruiting, hiring, classifying, training and assigning employees based on the strategic imperatives of the organisation’s workforce plan.

A comprehensive workplace skills plan will identify appropriate training priorities based on the organisations workforce needs now and in the future. New recruitment practices may need to be adopted to increase the representation of designated groups, or securing essential skills in the organisation. A comprehensive “Learning & Development strategy” may assist in developing future workforce needs, identified either in terms of the organisations workforce plan or required in terms of industry black economic empowerment charters.

Examples of WFP strategies include:

• Meet needs at senior levels through a 75 percent/25 percent blend of promotion from within and external recruiting.
• Focus recruiting and development on core positions that generate significant competitive advantage.
• Meet short-term needs for specific technical skills by using contractors.
• Redeploy individuals who are surplus in one area to a different area, providing accelerated development as required.
• Reorganize work to better utilize the available talent.
• Initiate intern programmes at local high schools to develop pools of qualified technicians to meet long-term future needs.

The required Staffing Plans and Actions have to be defined.

Staffing plans might include:

• Redeployment that eliminates a gap in one area while also reducing a surplus somewhere else
• Promotions
• Lateral moves
• Hiring to reduce a gap
• Accelerating internal movement (and defining the development that such movement entails) to reduce a future gap
• Using contractors
• Increasing or decreasing the use of overtime
• Encouraging turnover or early retirements to reduce a surplus
• Reductions in force (or other planned losses)

Once the staffing plans are completed (on a tentative basis), staffing actions can be defined (i.e., specific individuals can be identified). This level of detail requires more in-depth information on the skills and capabilities of the individuals being considered.

Investing in Human Resource Development and Performance

Traditional approaches to career planning, performance appraisals, reward management and employee development must be re-appraised in light of the vision, characteristics and mission outcomes as reflected in the HRM plans, policies, and practices.

Development responses will aim to increase business skills, the application of business skills (sometimes called competencies) and the behavioural elements all of which contribute to an organisation’s effective performance. Clearly, where a workforce planning exercise reveals that there is little projected growth in the workforce or that promotional or career development opportunities are limited, strategies aimed at employee retention will be very different from organisations which are experiencing considerable growth and expansion.

Investment initiatives for the individual, team and organisation are all geared to achieve high levels of organisational performance. It is important that at an individual level, particularly for senior staff, that they feel their development needs are agreed and that they are provided with the skills to do their jobs. At a team level, it defines the individuals’ ability to work flexibly with others and align individual and team skills and activities to business goals all of which ensures that the organisation is equipped to achieve its goals.

Reward strategies aim to align the performance of the organisation with the way it rewards its people, providing the necessary incentives and motivation to staff. Its components can be a combination of base pay, bonuses, profit sharing, share options, and a range of appropriate benefits, usually based on market or competitor norms and the organisation’s ability to pay.

Assessing and Sustaining Organisational Competence and Performance

Finally, few organisations effectively measure how well their different inputs affect performance. In particular, no measures may be in place for quantifying the contribution people make to organisational outcomes or, more important, for estimating how changes in policies and practices, systems, or processes will affect that contribution. Implementing clear quantifiable measures, identifying milestones in the achievement of specific organisational goals, and using concepts such as a “balanced scorecard” will articulate the results of the HR Strategic Plan in measurable terms. Regular evaluation of the plan will also assist in fine-tuning the HR strategic plan itself.

WFP MODEL

WFP Models are described on two bases:

1. Skill Based: This Model forecast on the basis of skill requirements and not the number of people required.
2. People Based: This Model forecast on the basis of the number of people required.

Skill Based WFP Model

Step 1: Demand forecast

This step begins with an analysis of the type of workforce that will be needed in order to accomplish future functional requirements and carry out the mission of the organisation. An important part of the analysis process is examining not only what work the organisation will do in the future, but how that work will be performed. How will jobs change as a result of technological advancements, or economic, social, and political conditions? What will be the reporting relationships? How will work flow into each part of the organisation? Questions that will impact the analysis include:

1. What changes are anticipated over the next “X” years regarding:
   • Mission, functions, strategic and operational goals and objectives?
   • Budget, trends, and patterns?
   • Impacts of internal and external environment?
   • Labour force trends?
   • Shifting skills/competencies?
   • Innovations in technology?
   • Changes in organisational structure, including delayering, reorganizing, restructuring?
   • Outsourcing?
   • Partnering?
   • Use of volunteers?
   • Duration of projects and programmes?
2. How will these changes affect:
   • Volume, type, and location of work?
   • Organisational structure and design?
   • Mix of skills?
   • Supervisor-employee ratios?
3. What is the planned organisational outlook for the future in terms of:
   • Number of Full time employees needed in the organisation and skills and competencies of positions?
   • Number and kinds of skills needed at each level of expertise?
   • Number of supervisors and non-supervisors?
   • Number and types of teams?
   • Diversity objectives?
   • Developmental needs?
   • Certifications?

After one determines the “what” and “how” of future work, move on to determine the knowledge, skills, and abilities needed to carry out that work. This future workforce profile will reveal positions that will be needed in the future, providing management and staff with a common understanding of the skills and behaviours that are important to the organisation. Research has shown that beginning at the demand side better focuses the issue because it highlights the future human resource requirements needed up front, and assists in providing more targeted analysis when determining the current and future supply within the organisation.

In defining the future requirements needed by the organisation, consider the following:

1. Determine the five to ten most critical competencies (knowledge, skills, and abilities) essential to address the issue.
2. Determine the skills that differentiate one level of job class from another.
3. Define future staffing levels and competencies needed to address the critical issue.

Step 2: Supply projection

The result of this step should, at a minimum, show the projected workforce supply in terms of staff numbers. There are a host of factors that can be included in the present workforce profile, including:

• Number of employees
• Competencies
• Job classification
• Salary level
• Age, gender, race
• Location
• Educational level
• Appointment status (permanent, temporary, etc.)

Once the present workforce profile has been prepared, project it out into the future as if no special management action was taken to replace attrition or develop existing staff. Retirement eligibility and other turnover statistics will prove valuable in this exercise.

Workforce analysis frequently stops with the consideration of demographic information (occupation, grade level, skills and experience, age, retirement profile, diversity, turnover rates, etc.). Although this information is necessary and pertinent to the process, there is much more that should go into the analysis besides this “snapshot” information. For instance, trend data is extremely important to the workforce analysis. Is the turnover rate changing over time? Are there specific factors influencing turnover? What types of positions have been filled recently?

To define current supply, assess the number of people the organisation currently has with the competencies needed to address the critical issue. Forecasting or projecting the future supply projection requires identifying variables and applying assumptions about how these variables will influence the type and level of workforce the organisation will have in the future.

 

Step 3: Gap analysis

This step involves comparing the workforce demand forecast to the workforce supply projection. Gap analysis identifies situations where demand exceeds supply, such as when critical work demand, number of personnel, or competencies will not meet future needs. It also identifies situations when future supply exceeds demand, such as when critical work demands, number of personnel or competencies exceeds needs. In either event, the organisation must identify these differences and make plans to address them. It is important to note that calculating gaps and surpluses will simply provide the organisation with data in terms of what needs to be done. It is the actions that the organisation decides to take to address these gaps and surpluses that results in the workforce plan.

People Based WFP Model

After identifying the staffing issues to be addressed, the staffing gaps and surpluses that must be eliminated (or at least alleviated) if that issue is to be addressed fully. In order to create staffing strategies, first define the staffing gaps and surpluses that are expected during each planning period of the planning horizon. These gaps are specific, quantifiable, and objective. There are three kinds of differences that can be identified:

• Staffing levels: The organisation might have too many staff (a surplus) or too few staff (a gap or deficit) in some job categories to implement the company’s business plans effectively.
• Capabilities: It may be that the organisation has the right number of staff, but that these individuals lack particular capabilities that will be needed to implement the company’s business strategies.
• Mix: It may be the case both that the organisation has the wrong number of staff and that the staff lack critical capabilities. This is considered a staffing mix problem.

Staffing Model Process

To define staffing strategies and plans for each staffing issue, a staffing model is developed, that includes a definition of staffing requirements (in terms of both skills and staffing levels), a projection of staff availability, and the calculation of specific gaps and surpluses for each of the planning periods.

Finally, define the staffing actions needed to eliminate these gaps and surpluses.

A model for defining staffing gaps and surpluses first define number of people now, and then use that information as a foundation for projecting the number and types of people that might be available at the point for which requirements have been defined. The assumptions regarding the losses, additions, and movement that might occur between ‘‘now’’ and ‘‘then’’ has to be made. By using this technique, you can compare supply and demand at the same point in time and get a meaningful estimation of staffing gaps and surpluses.

So, the model starts with determining future requirements (both required skills and required staffing levels) at a particular point in time (‘‘demand then’’). Based on the projections & probability assumptions about the number of people who might make any kind of staffing move (e.g., leave voluntarily, retire, be promoted, be redeployed, or be hired). Now, follow the following steps to calculate the total number of people required in future:

Step 1: Subtract from the current population the number of people who probably leave each job category (e.g., through voluntary turnover, retirements, and other planned losses).

Step 2: Add in the number of people that will be hired into each job (or added from sources any other source).

Step 3: Account for promotions and other movement (e.g., redeployment) by subtracting that number of people from the jobs they are leaving and adding them to the jobs they will be entering.

These staffing assumptions are now applied to the current population to see what staff will be available if all these staffing actions actually take place. The following steps:

Outcome of Step 1to 3: Forecast of the numbers and types of employees that will be available at that point in the future (‘‘supply then’’), given that all the staffing actions you assumed really do take place.

Now compare ‘‘supply then’’ to ‘‘demand then’’ and calculate staffing gaps and surpluses. Finally, define the staffing actions needed to eliminate these gaps and surpluses.

In this model, however, assumptions are made, only about the staffing actions that are uncontrollable. Usually, these ‘‘uncontrollable’’ actions include:

• Voluntary turnover
• Normal retirements
• Seniority-or tenure-based promotions
• Completion of hiring plans that are already in motion (e.g., openings that will be filled during the period by candidates who have accepted offers but have not yet started work)
• Returns or losses resulting from planned leaves of absence (e.g., because of health-related issues)

Create the first version of ‘‘supply then’’ by considering only uncontrollable actions like these. At this point, specifically do not make any assumptions regarding other staffing actions. Compare this preliminary ‘‘supply then’’ to ‘‘demand then’’ to determine the preliminary gaps and surpluses that result.

Now define the ‘‘controllable’’ staffing actions that are taken to eliminate these gaps and surpluses. Controllable staffing actions include virtually all:

• Hiring
• Promotions
• Transfers and redeployments
• Planned staff reductions
• Use of temporary or contingent staff
• Use of overtime
• Planned losses

Each of these staffing actions is a specific move that is made in an intentional way to meet a particular need that has been identified. The advantage of this approach is that it completely eliminates the guesswork (and thus all the iterations). Use this technique to figure out how many openings are expected, then determine how many of those openings can and should be filled with new hires. In fact, this technique allows identifying talent surpluses from which employees might be redeployed, eliminating the need for some hiring or promotion.

To conclude, it is typically most effective to adopt an overall approach to strategic staffing that takes into account the staffing actions that are anticipated between the current time and that point in the future for which demand has been calculated. The efficiency of the process can be improved (and the guesswork eliminated) by first considering the uncontrollable staffing actions and then determining the mix of controllable staffing actions needed to eliminate the resulting gaps and surpluses.

Here is a quick example of how ‘‘supply then’’ might be calculated for a given job category. Suppose that there are 40 people in a job right now. Suppose also that the following uncontrollable staffing actions are expected:

• The voluntary turnover rate for this job is 5 percent.
• Two people are expected to retire.
• One person will be promoted from this job to a higher level (a move based on seniority).
• One person has accepted a job offer and will join the company in two weeks.

What is ‘‘supply then’’ in this case? The calculation will look like this:

This calculation assumes that no other uncontrollable staffing actions will take place and that all controllable staffing actions will be defined and applied later in the modelling process. A similar calculation would be made for every cell of your model/matrix.

Define Staffing Gaps and Surpluses for the First Period

For each cell of the model, compare staffing requirements (demand) to staffing availability (supply) and calculate gaps (where demand exceeds supply) and surpluses (where supply exceeds demand). Subtract demand from supply. If this convention is used, staffing gaps will be defined as negative numbers and staffing surpluses will be defined as positive numbers. For example, if there is 10 staff in a job category that will require 12, you will have a gap of 2 people. On the other hand, if you will have 15 people in a job that will require 10, you will have a surplus of 5 staff. Figure 5-8 shows a simple example of what this might look like. Remember to identify capability gaps as well, not just differences in staffing levels.

Define Staffing Gaps and Surpluses for All Remaining Periods

After you have calculated gaps and surpluses for period 1, you might be tempted to try to define the staffing actions needed to eliminate those gaps and surpluses. As discussed in Chapter 4, you should not do this at this point. Doing so would mean that you were meeting staffing needs while considering only a short-term perspective. Resist this temptation and instead calculate gaps and surpluses for subsequent planning periods. To do this, use your ‘‘supply then’’ matrix from period 1 as the ‘‘supply now’’

 

Matrix for period 2.

1. Calculate ‘‘supply then’’ for period 2, factoring in any uncontrollable staffing actions that might happen during the period.
2. Compare the result to staffing requirements for the end of period 2 (which obviously could be different from the requirements for period 1) and calculate the staffing gaps and surpluses that are expected in each job category for the end of period 2. Repeat this process for all remaining planning periods, always remembering to:
   • Use ‘‘supply then’’ from the previous period as ‘‘supply now’’ for the subsequent period.
   • Define and include the uncontrollable staffing actions that you think will occur during the period you are analyzing.
   • Define a new set of staffing requirements for each period.

These gaps and surpluses are preliminary, of course, because they do not take into consideration the staffing plans that you will implement (i.e., the controllable staffing actions that you will take). They are a necessary interim step, however. Note that this approach represents a significant departure from common practice. Usually, the staffing actions needed to address gaps and surpluses are defined for a given period before the analysis for the subsequent period begins. This practice precludes any longitudinal view of staffing needs (i.e., analyzing needs across periods), and this longitudinal view is absolutely required if effective staffing strategies are to be developed.

FORECASTING METHODS

The organisation’s strategic plan and allied business plan provide guidance as to the number and type of employees that the organisation needs during the planning period. Expansion, retrenchment, new products or services, introduction of new technology, entrance of new competitors in the market, economic conditions, employee retirements, workforce turnover, and so forth must be considered when forecasting workforce needs. Forecasting is the process of using both historical data and predicted scenarios to determine workforce needs during a stated planning period.

FORECASTING HR SUPPLY

Trend Analysis: Trend analysis is considered one of the simplest methods of forecasting future HR supply. It assumes that past trends and ratios in employee movement are stable and indicative of future trends and ratios in employee movement. The information collected in the HR audit is used to identify labour patterns-hiring patterns, retirement patterns, productivity patterns, and turnover patterns. By examining the trends of the past, the HR department can predict the effect of the same activity on the future of the organisation, because it is assumed that these patterns will remain stable. In more complex models, trend analysis is not used alone, rather is treated as a necessary step in understanding the current workforce profile and the assumptions that can be made. For example, an organisation reviewing historical data may realize that every year, approximately five percent of their staff retire, six percent resign, and three percent are dismissed. Using a simple trend analysis, future HR supply forecasts can be established by assuming an average reduction in internal HR supply of 14 percent per year.

Skills/Competency Models Building on the skills inventory, the skills/competency models focus on matching the right skills or competencies needed for each job with the skills available within the organisation. Unlike other models that predict headcount (e.g., trend analysis or Markov models), the skills/competency models focus on identifying the skills/competency supply within the organisation, and helping focus future recruitment, selection, retention, and training activity in core areas of key skills/competencies needed for the organisation to succeed. Recently, organisations have been moving away from a focus on skills to a focus on competencies.

A competency is a set of behaviours that encompass skills, knowledge, abilities, and personal attributes, that taken together, are critical to successful work accomplishment. These are usually determined by studying top performers’ activity within their job context, which identifies the attributes that separate top performers from other employees within the organisation.

The competency model is a future-oriented model that first reviews competencies that are aligned with an organisation’s mission, vision, and strategy, and then aims to identify an ideal workforce in terms of those competencies. However, a competency model cannot be applied without the previous information obtained in the HR audit. Thus, the reliability and validity of the information collected earlier in the process is important in determining the accuracy of a competency model.

Replacement Charts A replacement chart is used to estimate vacancies in higher level jobs and identify how potential HR supply can fill these vacancies via internal movements from lower levels jobs. A comprehensive replacement chart will include information regarding possible replacements for vertical or horizontal movement. Generally, a replacement chart includes information about employees’ performance, readiness to fill the position, and education. In some cases, a replacement chart will include information about an employee’s age, tenure, gender, and visible minority status in addition to required experiences, education, or skills needed for the position. The demographic information provided is an effort to manage firm diversity, but HR and management teams must be careful when conducting a replacement plan not to allow such information to result in any potential illegal discrimination.

Replacement planning to prepare for these departures-through recruitment, orientation, training, and skills development of the replacements-will be critical to ensure an organisation’s ability to meet their goals.

Succession Planning: While replacement charts provide identification of potential replacements for vacancies within an organisation, succession planning focuses on identifying, developing, and tracking future leaders for executive positions or positions that are critical to the success of the organisation. Succession planning is a longer-term process of grooming a successor (selected from a pool of candidates on the basis of perceived competency) for management or critical positions. An organisation can use the skills inventory, HR audit, or a succession summary to help identify potential successors and skill gaps that can be addressed through succession planning.

Staffing Tables To assess internal HR supply, a staffing table provides a clear graphical view of all organisational jobs and the current number of employees at each job. It presents a simple visual understanding of an organisation’s staffing level within each department and the organisation as a whole, in an effort to help understand the combination of employees that make up an organisation’s internal workforce. This information is useful in evaluating staffing levels by department, branch, or project; the types of staff at each level; and the combination of staff in all categories.

Developed using information collected in the assessment of the existing labour force in the HR inventory, an organisation can predict future HR supply by assuming a constant mix of employees in the organisation, based on the staff table, or they can make adjustments based on projected growth or decline at each staffing level within the organisation. Since staffing tables are relatively simple, they are frequently used as a precursor to more complex methods of forecasting future HR supply, such as a Markov analysis.

Markov Analysis A Markov analysis extends beyond the staffing table to help predict internal employee movement from one year to another by identifying percentages of employees who remain in their jobs, get promoted or demoted, transfer, and exit out of the organisation. By tracking and predicting employment movement within an organisation, the Markov analysis allows for the development of a transition matrix to forecast internal labour supply.

The Markov analysis extends beyond a simple exit and retention understanding to provide valuable information on employee movement within the firm, clearly identifying projected labour supply for the following year. This represents both a stock approach (quantities in a point of time) and a flow approach (comparing quantities that change over a period of time).

The Markov analysis example in Exhibit 2.5 includes estimates of employee movement within each level for a hypothetical manufacturing firm. As can be seen in this example, 67 percent of the employees in a general labourer position will continue in this position next year. One in ten general labourers (10 percent) will be eligible for a promotion next year, and should be promoted accordingly. The remaining 23 percent of general labourers will be exiting the firm. It is clear that some employees should be eligible for a promotion next year, while others should actually be demoted based on their performance and skill set. As well, the exit predictions highlight.

QUANTITATIVE TECHNIQUES FOR FORECASTING HR DEMAND

Trend Analysis: Trend analysis predicts the demand for labour based on projections of past relationship patterns over a number of years between an operational index (e.g., revenue per employee, productivity per employee) and the demand for labour (number of employees). As one of the simpler methods of forecasting HR demand, trend analysis assumes that an organisation’s past employment needs are indicative of future needs when linked with an operational index.

There are a number of steps required to successfully complete a trend analysis. First, it is critical to select the right business or operational index. E.g. A service provider may select the number of customers each customer service representative can effectively deal with to estimate the number of customer service representatives needed. A large business may select sales volume per sales employee to predict the number of employees needed.

Next, the organisation tracks the business index and the size of the workforce over time. Typically, five years of historical data is sufficient in a trend analysis, but this can vary based on organisation history and industry. With this information, the planning team can calculate the average ratio of the business or operational index and the workforce size in the past. This information is used to forecast HR demand.

Ratio Analysis: Ratio analysis determines future HR demand based on ratios between assumed casual factors and the number of employees needed. Ratio analysis appears very similar to trend analysis, but the primary difference is that there is no requirement for significant historical data collection. This allows organisations that do not have easy access to multiple years’ worth of data to use current ratios to help estimate future demand. In addition, while trend analysis links one business or operational index over time, ratio analysis allows for multiple causal factors to be used to predict demand. Ratio analysis is also useful in benchmarking organisational efforts with industry or competitive standards to help identify areas of strength or weakness in an organisation. For example: If, historically, it takes five employees for each 100,000 unit of product produced, a projected increase of 1,000,000 units per year will require an additional 50 employees.

Regression Analysis: Regression analysis is a more complicated method of estimating HR demand, but allows for adjustment of seasonal fluctuation, long-term trends, and random movement when forecasting. This method provides statistical projections using mathematical formulas to determine the correlation between multiple measureable output factors (independent variables) and an organisation’s employment level (dependent variable). A regression analysis is useful in predicting the strength and direction of a linear relationship between two variables, but in situations of a non-linear relationship, estimates would not be valid.

When there is one independent variable, there is one regression. When there are multiple independent variables, there are multiple regressions. A correlation depicts a value between −1 and 1. The closer the value is to 0, the less predictive of the relationship between the two variables. The closer the value is to either −1 or 1, the more predictive the relationship between two variables. The positive or negative sign in front of the correlation number indicates the nature or direction of the relationship.

Turnover

Analysis of historical turnover-in reality a type of trend analysis-provides additional data for forecasts. Average turnover rates provide an indication of the number of new employees required just to maintain current employment levels. Obviously, turnover is affected by many environmental factors, most notably unemployment rates, so other variables must be considered when using these data for forecasting.

Computer Modeling

Many organisations use sophisticated forecasting software. This permits the organisations to evaluate workforce needs under various scenarios.

QUALITATIVE TECHNIQUES FOR FORECASTING HR DEMAND

Delphi Method: The origins of the Delphi method can be traced back to the late 1940s when the RAND Corporation used a famed “think tank” to estimate how future events effected HR projections for an organisation. This process involves a panel of experts using their judgements to make estimates of short-term future demands. Experts use a variety of factors to make their judgements, including economical, demographical, technological, legal, and social conditions outside of the organisation, as well as production, sales, turnover, experiences, and education levels of the workforce within the organisation.

This method involves a number of steps. During the process, experts are not permitted to engage in direct face-to-face contact or communication. This is in an effort to prevent groupthink, influence of others, or confrontation of experts, which can influence the results. First, experts must be identified to participate in this task. Second, each expert is asked to submit HR demand forecasts, including specification of sources of information and assumptions used to estimate demand. Next, each submission is gathered by the HR planning group, which then summarizes the results. The aggregated results are sent back to the experts, who are given an opportunity to adjust their forecasts based on the information provided in the summaries. These steps are repeated until the expert opinions converge, something that may occur after three to five rounds. Each feedback loop provides an opportunity for experts to understand their position relative to others and the reactions of others to the summaries provided.

One of the criticisms of the Delphi method is that it is subjective in nature, and thus may be difficult for those who prefer quantitative approaches to fully commit to. In addition, the organisation should be explicit with experts not to discuss their estimates with others, something that can happen when experts have strong working relationships or work in close proximity to others.

Nominal Group Technique The nominal group technique (NGT) was first developed by Delbecq and VandeVen as an alternative to simple, individual brainstorming of ideas. This process involves multiple experts (usually line and department managers) meeting face to face to discuss independently formulated positions of an organisational issue, with the ultimate aim of securing an accurate assessment of a given situation. NGT can be used to help forecast HR demand for an organisation or can be used to solve other organisational issues (e.g., decisions about launching new products or processes, managing change, establishing sales targets, etc.).

This technique differs from the Delphi technique in that it encourages face-to-face meetings and discussions about an issue as a critical step in the decision-making process. There are four main steps in this process:

 

Step 1: Generally five or six experts are solicited to participate in the NGT. Each expert is asked the same specific question (e.g., What are your predictions for future HR demand in this branch/unit/department/ organisation for the next X number of years? What are the causes of any expected changes in demand?). Independently, each expert writes down their solutions to the issue or question.

 

Step 2: Experts then meet face to face (usually around a table) and are asked to individually present their solutions. These solutions are often recorded on flipcharts or blackboards to allow for comparisons in later steps. During this process, each member is encouraged to freely present their results, and interruption or discussion from other group members on the results is discouraged at this point. This allows for each member to present their ideas completely, without judgement or influence.

 

Step 3: After all experts have presented their results, clarification questions are solicited. A facilitator should encourage questions on clarification of information so as to encourage group dialogue and discourage self-protectiveness about estimates.

 

Step 4: Each expert is asked to secretly rank estimates. Voting is anonymous and calculated using equal participation from team members. The facilitator then uses the estimate from step 1 that draws the highest ranking as the estimate used to forecast HR demands.

 

In a case where there are two or more close high ranking estimates of future HR demand, steps 3 and 4 can be repeated, with only these estimates presented, to allow for further discussion and to build confidence in the results.

Scenario Analysis Due to the high number of factors that can affect predictions of HR demand, some organisations prefer to conduct a scenario analysis rather than determining a single demand scenario. Scenario analysis provides multiple estimates of future HR demand, contingent on a unique set of assumptions and circumstances for each scenario. This method involves recognizing uncertainties about the future. For example, forecasts are contingent upon the overall economic outlook of the firm’s output. An organisation could create three different estimates accordingly, one for a constant economic situation (e.g., zero growth), a second for some anticipated economic growth (e.g., five percent growth), and a third for the possibility of economic decline (e.g., five percent reduction).

Expert brainstorming activities help to develop agreement on long-range factors and the impact of changes on the HR forecasts. These can include internal changes (e.g., adoption of new technology, productivity or workforce changes) or external changes (economic position, legal requirements, competitive changes) that cannot be predicted with confidence to have a single effect. The possible result of these changes will create a forecast for each possible scenario that the organisation can expect. The group will assess potential uncertainty and estimate realistic potential future scenarios. Generally, there will be three estimates secured, one at the level of continuance with the status quo, one best-case or optimistic scenario, and one worst-case or pessimistic scenario. As a result, the organisation secures a range of forecasted HR demand and must continuously monitor influencing factors to narrow that range as time progresses.

While this method is the least effective in determining a single estimate of future HR needs, this option provides some clarity as to future estimates for dynamic organisations, organisations that are experiencing high change, or in cases where the past is not the best predictor of the future.

Managerial Judgment

Managers and executives are asked, based on their experience and knowledge, to develop forecasts. Forecasts, like budgets, can be a top-level overall estimate or a bottom-up aggregation of multiple departmental estimates. Top-level forecasts provide a gross indicator of needed employment levels, but do not indicate where those employees should be allocated in the organisation. Bottom-up forecasts, provided by managers in the various departments, provide a better idea of allocation of the workforce and the types of employees that are needed. However, bottom-up forecasts tend to overestimate workforce needs as each manager tries to increase staff size.

EVALUATION OF WFP

The implementation of the workforce plan should result in the desired workforce the organisation needs in terms of the number of employees, with the appropriate skills, at the right locations, etc. The workforce plan should be continually measured for its success in meeting both efficiency and effectiveness parameters. While efficiency will measure the time, speed, cost, and volume regarding the plan, effectiveness will measure whether the plan is achieving the desired result of “having the right people with the right skills at the right time.”

In addition to collecting information from programme users, the organisation should measure the results of the workforce plan, looking for examples of efficiency and effectiveness such as:

• Do the workload and workforce gaps still exist?
• Are planning assumptions still valid?
• Is there an imbalance between workload, workforce, or competencies?
• Has the overall organisation performance increased?
• Do adequate staffing levels still exist?

Successful workforce planning is an active, ongoing, and dynamic process that must be repeated and adjusted.

CONCLUSION

While HR strategies must be developed to support the achievement of the organisation’s objectives, it is a two-way process. HR strategies can themselves be critical inputs in determining the strategic initiatives for the organisation. A fatal error, however, is to develop and implement HR strategies without having regard for the goals and objectives which the organisation has explicitly or implicitly identified. A common mistake is the development of workplace skills plans which are not linked to any strategic goals or objectives or which have no affirmative action components. Similarly, the isolated identification of affirmative action numerical targets without first conducting a workforce and succession planning exercise is in most instances, simply meaningless.

References

A Strategic Human Resource Management System for the 21st Century. Naval Personnel Task Force, US Department of Navy, September 2000.

Developing a Human Resources Strategy A good practice guide. South East Employers, June 1999.

The Human Resources Standards Generating Body has developed a specific Unit Standard addressing the development of a Strategic Human Resource Plan, entitled “Contribute input into the human resources management strategic plan”.

http://www.expresspharmaonline.com

http://www.fairfaxcounty.gov

Strategic Workforce Planning

http://www.hreonline.com

http://www.spa.ga.gov Designing Your Strategic Staffing/Workforce Planning Process CHAPTER 5.

http://www.trainingmag.com 2009. Strategic Workforce Planning means smarter HR Decisions.

http://www.workinfo.com. A guide to strategic human resource planning

http://economictimes.indiatimes.com, retrieved on Jan23,2017.

By Katie Kuehner-Hebert, http://www.hreonline.com, accessed February 24, 2012.

A Strategic Human Resource Management System for the 21st Century. Naval Personnel Task Force, September 2000.

http://www.spa.ga.gov

www.workinfo.com

www.workinfo.com

www.workinfo.com

HR Planning City Hotel, www.citehr.com, accessed July 2018.

Oasis executive search and management consultancy

www.expressindia.com

www.trainingmag.com

Review Questions

1. Explain Strategic Human Resource Planning Process.
2. Explain Work Force Planning Process Model I & II
3. How does WFP affect Talent management in the organisation?

Time to Apply theory to Practice: Assignment

Prepare a report on “Workforce Planning analysis”

1. Pick up the Annual Report of any organisation. Focus on published HR data in the report.
2. Does this data give you a clue for WFP?

Critical & Analytical Thinking: HR Planning at The Magnum

The Magnum, is a hotel located in the middle of a metropolitan city. It caters mainly for business trade during the week and for holiday trade during the weekends and in the summer. In the summer and at weekends there is, therefore, a greater demand for catering and waiting staff as there is a greater demand for lunches. During the same periods there is a lesser demand for housekeeping staff as the customers are mostly longer-stay. The hotel has been gradually improved and refurbished over the past five years, and trade, although reasonably good to begin with, has also gradually improved over the period. There are plans to open an extension with a further twenty bedrooms next year.

Note 1 

There has been a particular problem in recruiting kitchen assistants, waiting and bar staff. This is partly due to local competition, but also to the fact that early starting and late finishing times make travel very difficult. Often there are no buses at these times and taxis are the only available transport. One or two hotels in the area have begun a hotel transport system, and the Magnum management have decided to investigate this idea in order to attract a higher number of better quality applicants. A second problem has been identified as the lack of availability of chefs and receptionists of the required level of skill. It is felt that the local colleges are not producing potential staff with sufficient skills, and therefore the management of the Magnum have decided to consider:

1. A training scheme, either run internally or in conjunction with other hotels.
2. Better wages to attract the better trained staff from other employers.
3. Investigation of other localities and the possibility of providing more staff.

Note 2

Having mapped the environment, the hotel management looked at the demands and responses for each priority area. For ‘customers’ the beginnings of the list are shown in the Table below.

 

Note 3 

The management of the Magnum decided that one of their key objectives over the next three years was to become known for excellence in customer service. This was seen as a key tool to compete with adjacent hotels. Managers used brainstorming to identify the staff behaviours that they wanted to see in place, and summarised their ideas in the format in Table below.

 

In addition to this a suggestion scheme was instigated to collect ideas for improvement in customer service. A payment of Rs. 1000 to be made for each successful suggestion.

Note 4 

The Magnum management has plans to open a further twenty bedrooms in a new extension during the coming year. On the basis of this simple model the additional staff required could be worked out as follows:

• Fifty-five bedrooms require 60 staff.
• The ratio of staff to bedrooms is therefore 1.09 staff per bedroom.
• If the same relationship were maintained (i.e. without any economies of scale) the additional number of staff needed would be: 20 bedrooms
• 1.09 staff = 21.8 extra staff needed. Thus total staff needed would = 81.2 full-time equivalent staff.

Note 5 

The managerial staff at the Magnum exercised judgements on the following human resource planning matters:

1. Management considered the probable reasons for the relationship between people demand and time. It was felt that this was most probably due to the gradual improvement in the hotel over the last five years. Since this improvement had virtually reached its potential it was felt that the relationship between employee demand and time would change.
2. Judgements had to be made on whether the occupancy of the new wing would immediately justify all the additional staff to be appointed.
3. The management considered that since the weather had been very poor in the preceding summer, the bookings for the following summer period might be slightly down on the last year and this shortfall might not be made up by increasing business trade.
4. Judgements were made as to whether staff could be better utilised, with the effect that the additional numbers of staff projected might not be so great.

Note 6 

The managers of the Magnum decided to encourage greater staff flexibility and interchangeability. This interchangeability would be particularly useful between waiting duties and chamber duties. At the present time waiting duties are greatest at the weekend and least during weekdays, whereas chamber duties are the other way around. The effect of this is that waiting staff and chamber staff both have a number of hours of enforced idle time, and the feeling was that there was some overstaffing. By securing flexibility from staff (by paying a flexibility bonus) it was felt that the smooth running and efficiency of the hotel would be considerably increased. It was calculated that the nine chamber posts and eight waiting posts could be covered by sixteen combined posts (all FTEs).

Note 7 

Managers of the Magnum assessed the levels of customer service at present by collecting questionnaire data from both staff and customers and conducting a series of interviews with staff. They also asked in what areas service could be improved and asked staff how this might be achieved. As well as specific targets for improvement, they found many examples of systems and organisation that did not help staff give the best customer service. Staff understood that getting the paperwork right was more important than service to the customer in checking out and in. The paperwork systems were over-complex and could be simplified. Also, shift-change times were found to correspond with busy checkout times. Plans were developed to improve systems, organisation and communication.

Note 8 

The statistical analysis of staff ( As given in the below Table) was aimed at occupation, age and full-time equivalent posts. This analysis was used primarily for three main purposes:

1. Full-time equivalents needed to be worked out so that this figure could be used in other manpower planning calculations.
2. To consider the occupational balance of staff and to give information which would be useful from the point of view of staff interchangeability.
3. To plan for future retirements and, in consequence, look at recruitment plans and promotion plans.

Note 9 

At the Magnum eighteen staff had left during the preceding year. The annual labour turnover index was therefore worked out to be:

(*The average number of staff employed over the year is different from the maximum number of staff that has been employed and were desired to be employed.)

Note 10 

At the Magnum, of the eighteen staff that had been recruited over the year, three had been replacements for the same kitchen assistant’s job, and two had been replacements for another kitchen assistant’s job. The stability index was therefore worked out as:

(*At exactly one year before there were only 69 of the desired 72 staff in post.)

Note 11 

An analysis of leavers over the past year from the Magnum was done. It shows how the majority of leavers had shorter lengths of service, with periods of employment of less than six months being most common.

Note 12 

Analysis of the age distribution (Below Table) indicates that there may be some difficulties with promotions. In particular, a problem was identified for management promotions. There are four general managers, the youngest being 21. In the past such a junior manager would have been promoted after two years’ service, which they had just completed. The ages of the other managers indicate that there will be no retirements in the immediate future and management staff turnover has, in the past few years, been low. In view of this it was thought likely that the junior manager would leave shortly. This was not desired since they were particularly able, so ways of dealing with this promotion block were considered, such as creating a new post, which might retain the junior manager’s services until a promotion became available.

 

Questions

Prepare HR Plan for the Magnum.