Human Resource Planning (part 1)

Definition and basic example

We define as human resource planning (HRP) all actions undertaken to:

  • forecast company personnel needs for the short/medium/long-term
  • forecast company personnel availabilities for the short/medium/long-term
  • compare the two figures
  • devise the necessary actions in order to reach the desired level of personnel/skills
  • determine possible personnel shortage/surplus
 

Example

Sales and Customer Support Unit

Skill

Current Workforce

12-month Forecast

Difference

Actions

 
    Needs Availability    
A1. Sales Agent

100

110

71

-39

Search for new personnel Internal Training
A2. Sales Manager

20

15

22

+7

 
B1. Technician

200

250

140

-110

 
B2. Chief Technician

15

25

22

-3

 

Totals

335

400

255

-145

 
 

The example above shows a partial study conducted over a 12-month period on a specific unit (sales and customer support) which, for sake of simplicity, we’ll suppose to have only four skills.

We write down the current level for each position (in terms of number of employees), needs, and availabilities in 12 months, and we get a total shortage of 145 units.

We notice that shortage is non-evenly distributed for the 4 skills. There is a shortage for 3 skills (of 39, 110 and 3 workers respectively). There is a personnel surplus for 1 skill (7).

These figures will guide the action plans to be taken. Differences are of different types and values for each skill. As a result, action plans will be different for each skill, in the hope of balancing personnel needs and availabilities in 12 months.

Let’s take a more detailed look at the process.

Forecast Process

A phone call to the payroll office will be enough to get the list of skills used in the unit under study and the current number of employees for each skill (A1, A2, B1, B2 in the previous example).

On the other hand, writing figures in the “12-month Forecast Needs and Availabilities” might seem esoteric. Will we resort to the classic fortune teller’s crystal ball?

The answer, of course, is no. We have precious company information that will allow us to write figures in each column that will be reliable enough.

12-Month Needs

Every company has a financial budget where someone has forecasted the 12-month sales figures for each product/service. Moving from sales figures to production quantities and then to personnel needs is something we can do. This is called “plan–based” HRP.

The ratio between production figures and the needed workforce yields the company productivity index, and it is company-specific. It depends on several factors: technology level, used machinery, safety standards, pollution standards, etc.

During the year, sudden changes in the public taste or new labour laws might bring havoc to the planned figures.

In this case we deploy special corrective “projects/studies”. Just like a ship’s captain, a manager spends his days adjusting the route which is daily challenged by storms, leaks, and emergencies of all sorts.

Short-term needs (2 to 3 months) are known with accuracy when using Euplan. When we input planned daily services and we expand them for the next months, Euplan will automatically provide a warning for possible critical situations.

As an action plan, line operators may decide of their own will to suspend vacations and licenses during critical periods and/or ask the personnel office for extra help.

 

Short/Medium/Long-Term Planning

Planning means looking into the future. How far shall we look? Usually we plan using 3 time frames:

  • long-term (>3 years)
  • medium-term (1-3 years)
  • short-term (1 year or less)

You can’t make plans based on nothing, so the maximum extent of HRP follows the time frame used by the planning office.

Special events within the company (opening of a new store, launch of a new product, etc.) will be handled as projects/studies a few months long.

 

Skills/Levels

For which skills/levels shall we plan?

In our example, we used needs and availabilities for 4 skills/categories:

  • Sales agent
  • Sales manager
  • Technician
  • Chief technician

In general, we must base our analysis on every skill/category for which a shortage or surplus will matter.

In the event of a shortage or surplus for a given skill/level, we have to identify possible mobility paths aimed to capitalize on the existing workforce and minimize new hirings and/or layoffs.

 

Measurement Unit

In order to fill in the “Current Workforce” column, we will use the figures obtained from the payroll office. Right? Yes, but with some caution.

If a full-time employee works 40 hours per week, a 20 hours-per-week part-time employee cannot be counted as 1.

Our unit of measurement will be FTE (Full-Time Equivalent), where a full-time employee will be valued 1, a 20-hour part-time employee will be valued 0.50, and a 30-hour part-time employee will be valued 0.75.

 

12-Month Availabilities

You will remember how we solved our homework problems: the volume of water inside a tub at time T will be equal to volume measured at time T0 plus water that flows in between T and T0 minus water that flows out between T and T0.

Payroll office will provide us with the number of available employees at time T (conveniently converted into FTEs).

Now we have to guess how many employees will leave the company (or change position/level) within the next few months and how many will be hired during the same period.

Turn-over index is a precious historic parameter which is company-specific. It shows which average rate of employees (per skill and level) leaves the company in 12 months.

If we add up the planned personnel transfers during the period to the total, we have:

 

Time T0

+

Inflows

-

Outflows

=

Time T1

Current Workforce Level=100   Promotion+ Transfer=10   Promotion+ Transfer =25 Exit=12   Forecasted Availabilities=75
 

Once possible critical situations are identified (personnel shortage or surplus for each single skill/level), we must decide the necessary action plans that will minimize hirings and layoffs.

We will talk about this subject in a future article.

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