1. CHAPTER 5: HUMAN RESOURCE PLANNING Copyright © 2005 South-Western. All rights reserved.

2. 1–21–2 Human Resource Planning (HRP) First component of HRM strategyFirst component of HRM strategy All other functional HR activities are derived from & flow out of HRP processAll other functional HR activities are derived from & flow out of HRP process Basis in considerations of future HR requirements in light of present HR capabilities & capacitiesBasis in considerations of future HR requirements in light of present HR capabilities & capacities Proactive in anticipating & preparing flexible responses to changing HR requirementsProactive in anticipating & preparing flexible responses to changing HR requirements Both internal & external focusBoth internal & external focus First component of HRM strategyFirst component of HRM strategy All other functional HR activities are derived from & flow out of HRP processAll other functional HR activities are derived from & flow out of HRP process Basis in considerations of future HR requirements in light of present HR capabilities & capacitiesBasis in considerations of future HR requirements in light of present HR capabilities & capacities Proactive in anticipating & preparing flexible responses to changing HR requirementsProactive in anticipating & preparing flexible responses to changing HR requirements Both internal & external focusBoth internal & external focus

3. Copyright © 2005 South-Western. All rights reserved.1–31–3 Human Resource Planning (HRP) Goes beyond simple hiring & firingGoes beyond simple hiring & firing Involves planning for deployment of human capital in line with organization &/or business unit strategyInvolves planning for deployment of human capital in line with organization &/or business unit strategy May involve:May involve: –Reassignment –Training & development –Outsourcing –Using temporary help or outside contractors Needs as much flexibility as possibleNeeds as much flexibility as possible Goes beyond simple hiring & firingGoes beyond simple hiring & firing Involves planning for deployment of human capital in line with organization &/or business unit strategyInvolves planning for deployment of human capital in line with organization &/or business unit strategy May involve:May involve: –Reassignment –Training & development –Outsourcing –Using temporary help or outside contractors Needs as much flexibility as possibleNeeds as much flexibility as possible

4. Copyright © 2005 South-Western. All rights reserved.1–41–4 Key Objectives of HR Planning Prevent overstaffing & understaffingPrevent overstaffing & understaffing Ensure organization has right employees with right skills in right places at right timesEnsure organization has right employees with right skills in right places at right times Ensure organization is responsive to changes in environmentEnsure organization is responsive to changes in environment Provide direction & coherence to all HR activities & systemsProvide direction & coherence to all HR activities & systems Unite perspectives of line & staff managersUnite perspectives of line & staff managers Prevent overstaffing & understaffingPrevent overstaffing & understaffing Ensure organization has right employees with right skills in right places at right timesEnsure organization has right employees with right skills in right places at right times Ensure organization is responsive to changes in environmentEnsure organization is responsive to changes in environment Provide direction & coherence to all HR activities & systemsProvide direction & coherence to all HR activities & systems Unite perspectives of line & staff managersUnite perspectives of line & staff managers

5. Copyright © 2005 South-Western. All rights reserved.1–51–5 Types of Planning Aggregate PlanningAggregate Planning –Anticipating needs for groups of employees in specific, usually lower level jobs & general skills employees will need to ensure sustained high performance Succession PlanningSuccession Planning –Focuses on ensuring key critical management positions in organization remain filled with individuals who provide best fit Aggregate PlanningAggregate Planning –Anticipating needs for groups of employees in specific, usually lower level jobs & general skills employees will need to ensure sustained high performance Succession PlanningSuccession Planning –Focuses on ensuring key critical management positions in organization remain filled with individuals who provide best fit

6. Copyright © 2005 South-Western. All rights reserved.1–61–6 Aggregate Planning Forecasting demandForecasting demand –Considers firm’s strategic plan’s effects on increases or decreases in demand for products or services –Assumptions on which forecast is predicated should be written down & revisited when conditions change – Unit forecasting (bottom-up planning) involves “point of contact” estimation of future demand for employees – Top-down forecasting involves senior managers allocating a fixed payroll budget across organizational hierarchy –Demand for employee skills requirements must also be considered Forecasting demandForecasting demand –Considers firm’s strategic plan’s effects on increases or decreases in demand for products or services –Assumptions on which forecast is predicated should be written down & revisited when conditions change – Unit forecasting (bottom-up planning) involves “point of contact” estimation of future demand for employees – Top-down forecasting involves senior managers allocating a fixed payroll budget across organizational hierarchy –Demand for employee skills requirements must also be considered

7. Copyright © 2005 South-Western. All rights reserved.1–71–7 Aggregate Planning Forecasting supplyForecasting supply –The level and quantities of abilities, skills & experiences can be determined using Skills Inventory. –Annually updated human resource information system (HRIS) is dynamic source of HR information –Markov analysis can be used to create transition probability matrix that predicts mobility of employees within organization Forecasting supplyForecasting supply –The level and quantities of abilities, skills & experiences can be determined using Skills Inventory. –Annually updated human resource information system (HRIS) is dynamic source of HR information –Markov analysis can be used to create transition probability matrix that predicts mobility of employees within organization

8. Copyright © 2005 South-Western. All rights reserved.1–81–8 Exhibit 5-2 Transition Probability Matrix for Restaurant

9. Copyright © 2005 South-Western. All rights reserved.1–91–9 Strategies for Managing Shortages Recruit new permanent employeesRecruit new permanent employees Offer incentives to postpone retirementOffer incentives to postpone retirement Rehire retirees part- timeRehire retirees part- time Attempt to reduce turnoverAttempt to reduce turnover Recruit new permanent employeesRecruit new permanent employees Offer incentives to postpone retirementOffer incentives to postpone retirement Rehire retirees part- timeRehire retirees part- time Attempt to reduce turnoverAttempt to reduce turnover Work current staff overtimeWork current staff overtime Subcontract work outSubcontract work out Hire temporary employeesHire temporary employees Redesign job processes so fewer employees are neededRedesign job processes so fewer employees are needed

10. Copyright © 2005 South-Western. All rights reserved.1–10 Strategies for Managing Surpluses Hiring freezesHiring freezes Do not replace those who leaveDo not replace those who leave Offer early retirement incentivesOffer early retirement incentives Reduce work hoursReduce work hours Voluntary severance leaves of absenceVoluntary severance leaves of absence Hiring freezesHiring freezes Do not replace those who leaveDo not replace those who leave Offer early retirement incentivesOffer early retirement incentives Reduce work hoursReduce work hours Voluntary severance leaves of absenceVoluntary severance leaves of absence Across-the-board pay cutsAcross-the-board pay cuts LayoffsLayoffs Reduce outsourced workReduce outsourced work Employee trainingEmployee training Switch to variable pay planSwitch to variable pay plan Expand operationsExpand operations

11. Copyright © 2005 South-Western. All rights reserved.1–11 Succession Planning Involves identifying key management positions the organization cannot afford to have vacantInvolves identifying key management positions the organization cannot afford to have vacant Purposes of succession planningPurposes of succession planning –Facilitates transition when employee leaves –Identifies development needs of high-potential employees & assists in career planning Many organizations fail to implement succession planning effectivelyMany organizations fail to implement succession planning effectively –Qualified successors may seek external career advancement opportunities if succession is not forthcoming Involves identifying key management positions the organization cannot afford to have vacantInvolves identifying key management positions the organization cannot afford to have vacant Purposes of succession planningPurposes of succession planning –Facilitates transition when employee leaves –Identifies development needs of high-potential employees & assists in career planning Many organizations fail to implement succession planning effectivelyMany organizations fail to implement succession planning effectively –Qualified successors may seek external career advancement opportunities if succession is not forthcoming

12. Copyright © 2005 South-Western. All rights reserved.1–12 Exhibit 5-4 Sample Replacement Chart

13. Copyright © 2005 South-Western. All rights reserved.1–13 Exhibit 5-5 Pros & Cons of Disclosing Succession Planning

14. Copyright © 2005 South-Western. All rights reserved.1–14 Reading 5.1 Heirs Unapparent Experts are looking more carefully at leadership needs for 21st century, & warning of:Experts are looking more carefully at leadership needs for 21st century, & warning of: –A shrinkage in pool of available managers –Escalating costs in recruiting outside talent –A lack of attention to developing leaders from within Blame inattention to succession planning on corporate world’s concentration on cost- cutting & downsizingBlame inattention to succession planning on corporate world’s concentration on cost- cutting & downsizing Experts are looking more carefully at leadership needs for 21st century, & warning of:Experts are looking more carefully at leadership needs for 21st century, & warning of: –A shrinkage in pool of available managers –Escalating costs in recruiting outside talent –A lack of attention to developing leaders from within Blame inattention to succession planning on corporate world’s concentration on cost- cutting & downsizingBlame inattention to succession planning on corporate world’s concentration on cost- cutting & downsizing

15. Copyright © 2005 South-Western. All rights reserved.1–15 Reading 5.1 Heirs Unapparent Old solutions to succession planning won’t work in increasingly complex worldOld solutions to succession planning won’t work in increasingly complex world Essential to develop executives who can cope with globalization & flourish in new corporate climate buffeted by changesEssential to develop executives who can cope with globalization & flourish in new corporate climate buffeted by changes Old solutions to succession planning won’t work in increasingly complex worldOld solutions to succession planning won’t work in increasingly complex world Essential to develop executives who can cope with globalization & flourish in new corporate climate buffeted by changesEssential to develop executives who can cope with globalization & flourish in new corporate climate buffeted by changes

16. Copyright © 2005 South-Western. All rights reserved.1–16 Reading 5.2 Succession Planning Design Shifts Key design shifts for succession systems:Key design shifts for succession systems: –Identify core strategic capabilities/competencies related to key positions & develop leadership model –Place initiative & responsibility for individual development in hands of candidate employees –Development process that aligns mastery of competencies with firm’s strategic goals & mission –Create succession process more open & less exclusive & secretive –Design succession process for ongoing & frequent review Key design shifts for succession systems:Key design shifts for succession systems: –Identify core strategic capabilities/competencies related to key positions & develop leadership model –Place initiative & responsibility for individual development in hands of candidate employees –Development process that aligns mastery of competencies with firm’s strategic goals & mission –Create succession process more open & less exclusive & secretive –Design succession process for ongoing & frequent review

17. Copyright © 2005 South-Western. All rights reserved.1–17 Reading 5.2 Succession Planning Design Shifts A succession system must:A succession system must: –Make sense for & be usable by different business units, each having unique needs –Process to focus & guide development of executives to meet strategic purposes –Be aligned with other HR processes also in transition –Assure pool of potential leaders is being prepared for executive positions –Be owned by senior management –Deal with diversity issues & changing demographics –Measurably add value & contribute to business success A succession system must:A succession system must: –Make sense for & be usable by different business units, each having unique needs –Process to focus & guide development of executives to meet strategic purposes –Be aligned with other HR processes also in transition –Assure pool of potential leaders is being prepared for executive positions –Be owned by senior management –Deal with diversity issues & changing demographics –Measurably add value & contribute to business success

18. Copyright © 2005 South-Western. All rights reserved.1–18 Reading 5.3 Strategic Levels of HR Long-termLong-term –Is activity conceptualized as long-term value? ComprehensiveComprehensive –Does it cover entire organization or isolated components? PlannedPlanned –Is it thought out ahead of time & is it well documented? Long-termLong-term –Is activity conceptualized as long-term value? ComprehensiveComprehensive –Does it cover entire organization or isolated components? PlannedPlanned –Is it thought out ahead of time & is it well documented? IntegratedIntegrated –Does it provide basis for integrating multifaceted activities that might otherwise be fragmented & disconnected? High value-addedHigh value-added –Does it focus on critical business success issues or on things that must be done but are not critical?

19. Copyright © 2005 South-Western. All rights reserved.1–19 Reading 5.3 Strategic Levels of HR Operationally reactive HROperationally reactive HR –Focuses on implementing day-to-day demands for HR Operationally proactive HROperationally proactive HR –Improves upon design & delivery of existing HR basics before problems set in Strategically reactive HRStrategically reactive HR –Focuses on supporting successful implementation of business strategy Strategically proactive HRStrategically proactive HR –Focuses on creating strategic alternatives Operationally reactive HROperationally reactive HR –Focuses on implementing day-to-day demands for HR Operationally proactive HROperationally proactive HR –Improves upon design & delivery of existing HR basics before problems set in Strategically reactive HRStrategically reactive HR –Focuses on supporting successful implementation of business strategy Strategically proactive HRStrategically proactive HR –Focuses on creating strategic alternatives

20. Copyright © 2005 South-Western. All rights reserved.1–20 Reading 5.3 Strategic Levels of HR HR becomes strategically reactive in business strategy implementation through:HR becomes strategically reactive in business strategy implementation through: –Supporting execution of tactics that drive long-term strategies –Developing cultural & technical capabilities necessary for long-term success –By providing change management support for tactical activities HR becomes strategically reactive in business strategy implementation through:HR becomes strategically reactive in business strategy implementation through: –Supporting execution of tactics that drive long-term strategies –Developing cultural & technical capabilities necessary for long-term success –By providing change management support for tactical activities

21. Copyright © 2005 South-Western. All rights reserved.1–21 Reading 5.3 Strategic Levels of HR 1.Define business unit for which HR practices are being designed 2.Specify key trends in external business environment 3.Identify & prioritize firm’s sources of competitive advantage 4.Define required culture & technical knowledge & skill areas required to support the sources of competitive advantage 1.Define business unit for which HR practices are being designed 2.Specify key trends in external business environment 3.Identify & prioritize firm’s sources of competitive advantage 4.Define required culture & technical knowledge & skill areas required to support the sources of competitive advantage

22. Copyright © 2005 South-Western. All rights reserved.1–22 Reading 5.3 Strategic Levels of HR 5.Identify cultural characteristics that firm should reduce or eliminate if it is to optimize competitive advantage 6.Design HR practices that will have greatest impact on creating desired culture 7.With these decisions made, firm should establish action plans for detailed design of HR processes 8.Final step specifies means by which effectiveness of entire process is measured 5.Identify cultural characteristics that firm should reduce or eliminate if it is to optimize competitive advantage 6.Design HR practices that will have greatest impact on creating desired culture 7.With these decisions made, firm should establish action plans for detailed design of HR processes 8.Final step specifies means by which effectiveness of entire process is measured

23. Copyright © 2005 South-Western. All rights reserved.1–23 Reading 5.3 Strategic Levels of HR Become proactive by:Become proactive by: –Learning enough about other functional areas to allow HR to contribute to business –Expanding/enriching parameters of HR agendas through which strategic alternatives are define & created Creates culture of of creativity & innovationCreates culture of of creativity & innovation Involved in full breadth of mergers & acquisition activitiesInvolved in full breadth of mergers & acquisition activities Creates internal capabilities based on future external environmental requirementsCreates internal capabilities based on future external environmental requirements Become proactive by:Become proactive by: –Learning enough about other functional areas to allow HR to contribute to business –Expanding/enriching parameters of HR agendas through which strategic alternatives are define & created Creates culture of of creativity & innovationCreates culture of of creativity & innovation Involved in full breadth of mergers & acquisition activitiesInvolved in full breadth of mergers & acquisition activities Creates internal capabilities based on future external environmental requirementsCreates internal capabilities based on future external environmental requirements