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Senior Writer: Akarsh Jain
Date: April 17, 2024“To win in the marketplace, you must first win in the workplace,” says Doug Conant, CEO of Campbell’s Soup. Human resources is undoubtedly the most important asset of an organization. How well you capitalize on their strengths and abilities determines an organization’s success. Businesses use human resource planning to achieve optimal utilization and allocation of workforce.
Effective human resource planning helps businesses estimate the number of employees required at any point in time and make staffing decisions accordingly. In this blog, we have outlined the importance, benefits, and steps in human resource planning. Read the blog to explore how you can leverage the process and drive your business goals.
"Investing in a robust HR software system can streamline human resource planning. Using efficient HR software helps improve the planning process, the accuracy of demand forecasts, and the design and implementation of the action plan. Now is the appropriate time if you haven't invested in HR software yet."
What Is Human Resource Planning (HRP)?
Human Resource Planning is the process of identifying the human resource requirements of a business and working out ways to hire them. It helps achieve a perfect balance in allocating human resources and helps mitigate manpower shortages or surpluses.
In other words, human resource planning helps businesses estimate future manpower requirements and determine how to allocate the available resources to achieve their goals. It translates an organization’s goal into estimates with the number of employees and level of skills.
A well-thought-out human resource planning process helps ensure that the organization’s staff members are utilized to their fullest potential on the one hand, and there is no shortage on the other. So it serves as a blueprint to manage the present state of the workforce and plan future requirements.
Human resource planning helps make important staffing decisions, including screening, hiring, training, work standards, firing, workplace succession, etc. An organization’s HR department is usually responsible for the planning process. Human resource planning has a key role in determining the success of an organization as it aligns the business vision with that of resource allocation.
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Importance of Human Resource Planning
Today’s business scape constantly evolves, and they endure continuous disruption. They must invest in a well-equipped workforce to meet changing business requirements. In the coming section, we have outlined the importance of HR planning.
1. Estimate the Future Manpower Needs
Human resource planning helps analyze the skills and strength of the workforce required to accomplish the organization’s activities and goals. Doing so helps ensure that sufficient manpower is always available and ensures a seamless operation.
2. Optimal Utilization of Human Capital
Human resource planning helps in human capital planning and allocates the available resources most effectively. As the process helps estimate and recruit the right amount of human resources needed to achieve the business objectives, it promotes optimal utilization of human resources.
3. Right Talent for the Right Job
In a business, different tasks require different skills and levels of expertise. Human resource planning helps estimate the skills needed to accomplish a task. These estimations help organizations hire and allocate talent for the right job.
4. Foundation for other HR functions
Human resource planning is the input for other HR functions in an organization, including hiring, recruitment, selection, training, promotion, compensation, etc.
5. Expansion and Diversification
When a business expands or diversifies, its human resource requirements may change. Human resource planning helps organizations estimate the changes in business requirements.
6. Succession Planning
Human resource planning helps future-proof the organizational workforce. The best performers can be identified, picked, and trained so when the right time arrives, they are ready to plunge in and shoulder the responsibilities at the senior level.
What Are The Benefits of Human Resource Planning?
Effective human resource planning is crucial for an organization’s success as it helps align the human capital with the business goals and objectives. The following are some of the key benefits of human resource planning.
1. Talent Management
Human resources planning helps manage the talent and human capital inside an organization. For example, it helps you identify star performers and offer potential opportunities for their growth. Doing so will add more value to both the organization and the employee.
2. Training and Development
HR planning help businesses understand the skill gaps in the organization, and offer required training support and assistance to the employees. Doing so enhances business productivity on the one hand and promotes employee engagement on the other hand.
3. Manage Human Resource Costs
Human resource planning helps optimize the cost of talent management in an organization. An efficient plan offers insights on the right amount of workforce so organizations can minimize leaky spending.
4. Promotes Employee Retention
Effective human resource planning helps organizations promote a positive workspace and culture. Doing so helps enhance job satisfaction which in turn enhances employee retention.
5. Mitigate the Risks and Uncertainties
Human resource planning helps organizations mitigate the risks associated with human resource hiring and allocation. Organizations become equipped to handle external disruptions like labor shortages, labor law changes, etc. As human resource planning helps organizations anticipate what is coming, they can prepare themselves better to handle the challenges.
6. Gain a Competitive Advantage
As explained earlier, human resources are an organization’s biggest asset. Efficiently managing the human capital in an organization helps reduce the costs, which can, in turn, be invested into other business operations or transferred as cost reductions to customers and clients. Doing so enhances the competitiveness of your business.
7. Coping With External Changes
Businesses endure constant changes and disruptions in the form of technological changes, market conditions, price changes, etc., impacting workforce requirements. Through human resource planning, businesses can spot trends and patterns that increase the organization’s resilience.
8. Conformity to Regional Compliance
Regarding human resource management, each country has its stringent labor laws. The regulatory norms are changed and updated frequently. Human resource planning helps review the norms and change the HR policy accordingly.
9. Strategic Workforce Planning
Human resource planning helps organizations make strategic succession plans. Investing in proper planning helps organizations plan succession and promotion to manage the internal disruptions that occur when employees retire or quit an organization.
10. Align the Human Capital With Business Goals
Human resource planning helps align the human capital with the business’s goals, vision, and objectives. As the team invests concerted effort, they tend to reach the goals faster.
Human Resource Management Process: 5 Steps
Human resource planning systematically aligns human capital and resources with the business vision. Typically, human resource management involves 5 major steps. In this section, we explain the process of human resource planning.
1. Determine the Goals and Objectives
The success of human resource planning depends on how well it aligns with the business goals and objectives. So, the first step in human resource planning is to determine the HR goals based on what the organization desires to achieve in the future and how it aims to achieve the same.
As each department in an organization has different objectives and human resource requirements, HR professionals work with the management to determine their human capital requirements. For instance, some departments may get bigger and require more employees, while others may undergo downsizing. Human resource planning helps reallocate the resources from the latter towards the former.
2. Examine the Current Workforce Strength
Before working out a human resource strategy for the future, you must first assess the strength of your current employees. You should evaluate their strengths and weaknesses and take up a detailed assessment.
- What is the total strength of the current workforce?
- How many of them are employed under each department/ team?
- How many employees are present in each of the positions/ roles?
- What are the skills and competencies of the employees?
- What is their experience?
- What is the age of each of your employees?
You can collect the information from the existing HR database and augment it with data from performance appraisals and reviews. To gain a better picture, use visualization based on the individual roles, designations, and hierarchies. Map each employee to the level of the training they receive and the skills and expertise they hold. Doing so would aid in succession planning.
3. Forecast Demand and Requirements
After creating the inventory of skilled employees, the next step is forecasting the demand and skill requirements. In the first step, you analyzed the organizational goals. In the second, you would have got the strength of the existing workforce. Now, using the data and information collected during steps 1 and 2, forecast the business demand. You should estimate the people required and the expertise and skills needed.
In this step, you should evaluate the following.
- Does the organization need more employees?
- Should the organization hire full-time employees or part-timers and freelancers?
- Is the organization leveraging the fullest potential and abilities of existing employees?
- Is there an adequate supply of skilled resources in the labor market?
- Should the employees be trained and educated to empower them with skills and competencies to accommodate the changing needs?
While you do the workforce estimation, consider other exogenous factors like industry trends, labor costs, automation prospects, new products, employee turnover rates, employee retirement, etc.
To estimate the workforce demand, you can use the following techniques.
– GAP analysis
Using a Gap analysis, you can compare the skills and competencies of the existing workforce with the business goals and estimate the gap between the two.
– SWOT analysis
Estimate the existing workforce’s strengths, weaknesses, opportunities, and threats, and check what needs improvement to align with the business goals.
– Scenario planning
In scenario planning, you evaluate possibilities and estimate the workforce requirements accordingly. You can consider the rate of technological evolution, economic impact, etc., and evaluate the skill and workforce requirements under each scenario.
4. Design an Action Plan
You must create an action plan since you have estimated the workforce requirements. If there is a shortage, find ways to hire new resources, train existing employees, or transfer from where there is a surplus. On the other hand, if there is a surplus, you can work out transfers, layoffs, etc., to reduce the costs.
The action plan aims to transform an organization from the present state to the desired state. Action plans must have strategies and pathways that navigate you to the organizational goals and objectives.
The action plan varies from one organization to another. If there is a shortage, startups, and small businesses may consider training existing employees, and large enterprises may work out hiring strategies. So, in this step, organizations shed their focus on the hiring process, training, education, performance management, organization culture, etc. Once you finalize the action plan, you must communicate the intricacies of the plan to all the employees in the organization.
5. Review Your Plan Periodically
An action plan encompasses all the organization’s activities to achieve an optimal workforce. Once you roll out the action plan, you must conduct periodic evaluations. You should check the effectiveness of the human resource planning strategies you followed. You should review employee retention rates and engagement levels to evaluate the scope for improvements.
You can conduct performance reviews or take surveys with the employees to understand the effectiveness of the action plan. Based on the responses, you should change the action plan you followed. If needed, you must be prepared to start from scratch.
Remember that human resources planning is neither a one-fit-all strategy nor a one-time process. Rather, it is an ongoing, continuous process. It must be noted that the action plan and human resource management strategies vary from one organization to the other.
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Human Resource Planning Examples
Suppose a pharmaceutical manufacturing company needs an effective HR planning process to optimize its workforce management. It will do the following in steps.
1. As a first step, the company will identify its goals and objectives at the level of department, team, etc.
2. The next step is to examine the strength and weaknesses of the current workforce. The company should also examine the skills and capabilities of the existing workforce.
3. The business should forecast the demand considering the organizational goals from Step 1 and the strength of the existing workforce analyzed in Step 4.
4. As a next step, the organization must work out an action plan. It should work out a hiring plan if it requires more employees and consider educating and training the existing workforce depending on the skill requirements.
5. The organization should collect regular feedback to ensure the action plan is updated.
What Are The Challenges in Human Resource Planning and How To Overcome Them?
Undoubtedly, effective human resource planning is crucial to the success of an organization. Yet, there are barriers to human resource planning, and you must be aware of them to design and implement an effective plan. In this section, we have outlined some of the important challenges.
1. Finding a Skilled Labor Force
Employees are the primary asset of an organization. A key problem of human resource planning is finding and hiring a skilled labor force remains. This problem is due to the increasingly competitive business landscape. Delays in hiring may impact the outcomes of the human resource planning process.
2. Inaccurate Demand Forecasts
Workforce demand forecasts are made based on the organizational goals and requirements and the strength of the existing workforce. Inaccurate inputs may impact the quality of forecasts. Bias and judgments may also lead to skewed results. You must invest in robust HRIS software to enhance the accuracy of demand forecasts.
3. Technological Advancements
The technological landscape is fast evolving, and business activities are increasingly getting automated. Such technological shocks may impact the quality of outcomes of human resource planning. To mitigate the uncertainties, consider the exogenous apart from internal factors while estimating the demand.
4. Time Horizon
The outcomes of the human resources planning process get skewed with longer time horizons as the level of uncertainty increases as we move beyond the foreseeable future. It must be noted that human resources planning is a continuous process, and the action plans must be revised periodically.
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Conclusion
Human resource planning offers several benefits to businesses and the workforce, from efficiently allocating human capital to lowering business costs, enhancing employee engagement, and mitigating the risks of uncertainties.
Investing in a robust HR software system enhances the quality of human resource planning outcomes. The HR software market is expected to grow at a CAGR of 10% between 2021 and 2028. So, it is an appropriate time for businesses to invest in a reliable HR software system and streamline their human resource activities.
FAQs
1. How does HR planning contribute to business growth?
HR planning drives business growth in the following ways.
- Promote an efficient talent management strategy
- Enhance the productivity of different departments
- Improve employee engagement
- Make reliable forecasts about workforce demand
- Reduce the cost of human capital
- Gain a competitive edge in the industry
2. What is strategic human resource planning?
Strategic human resource planning is a systematic activity undertaken to identify the current and future workforce requirements based on the goals and objectives of a business.
3. What Is “Hard” vs. “Soft” Human Resource Planning?
There are two types of human resource planning. Hard human resource planning employs quantitative measures to ensure that the right workforce with the right skills is available when the business needs it. Soft human resource planning focuses on enhancing the work environment and culture to attract and retain a skilled workforce.
4. What are the best practices for HR planning during crises?
The following are some of the best practices for HR planning during an unanticipated crisis.
- Succession planning and promotion
- Training and education
- Human resource software
- Scale the workforce
- Reliable workforce demand
Akarsh is a B2B & SaaS content writer, having experience of over 3 years in the industry. His expertise lies in creating targeted content for Telephony, VoIP, and CRM domains. His proficiency also includes fine-tuning content for SEO optimization, guaranteeing enhanced visibility and engagement. Akarsh is committed to remaining at the forefront of emerging SaaS trends to ensure the creation of relevant and relatable content that adds value.
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