Human Resource Planning: Definition, Factors, Process, Barriers (2024)

Certainly, many organizations have voiced the idea that their human resources differentiated them from their competitors.

The significance of human resources as a core competency was confirmed in a study of 293 U.S. firms. The study found that HR management effectiveness positively affected organizational productivity, financial performance, and stock value.

Definition of Human Resource Planning.

Human resource planning is the major task of HRM because it is concerned with utilizing human resources. An organization does not own a person as it does capital and physical assets; this HR resource is seldom given proper attention.

Many managers have failed because they have taken their human resources for granted. It is one of the most critical management undertakings of this decade.

Various factors affect HR planning, such as retirements and transitions, the availability of employees with certain skill sets, and changes in the environment.

Some popular definitions of HRP are given below.

Robbins (2001) defines HRP as “the process by which an organization ensures that it has the right number and kinds of people at the right places, at the right time, capable of effectively and efficiently completing those tasks that will help the fulfill organization’s overall objectives.”

In the words of Coleman Bruce (1997), HRP is the process of determining human resources requirements and meeting those requirements to carry out the integrated plan of the organization.

Thus HRP translates the organization’s objectives and plans into the number of people needed to meet those activities. Through planning, management balances demand for and supply of the right number and kinds of people at the right time. It is a supply and demand calculation.

Human resource is an asset; it is an asset that appreciates and grows over time (Evanceivich, 1999). Machines, on the other hand, depreciate as time goes on.

According to the above definitions, HRP consists of the following elements:

• Establishing and recognizing future job requirements,
• Identifying deficiency in terms of quantity,
• Identifying deficiency in terms of quality and specification,
• Identifying the sources of the right type of man,
• Developing the available workforce, and
• Ensuring the effective utilization of the workforce.

8 Characteristics of Human Resource Planning

Future-Oriented

Human resource planning is prepared to assess the future requirement of the workforce in the organization. It helps identify the size and composition of resources for future purposes.

Continuous Process

Human resource planning is a continuous process. The human resource planning prepared today may not be applicable for the future due to the ever-changing external forces of the environment.

Hence, to address such changing factors, human resource planning needs to be revised and updated continuously.

Optimum Utilization of Human Resources

Human resource planning focuses on optimum utilization of resources in the organization. It checks how employees are utilized productively. It also identifies employees’ existing capabilities and future potentialities to perform the work.

Right Kinds and Numbers

Human resource planning determines the right number and kind of people at the right time and right place who can perform the required jobs. It also assesses the future requirement of human resources for the organizational objective.

Determination of Demand and Supply

Human resource planning is determining the demand for and supply of human resources in the organization. Then a match between demand and supply estimates the optimum level of human resources.

Environmental Influence

Environmental changes influence human resource planning; hence, it is updated as per the change occupied in the external environment.

Related to Corporate Plan

Human resource planning is an integral part of the overall corporate plan of the organization. It can be formulated at strategic, tactical, and operational levels.

A Part of the Human Resource Management System

As a part of the total human resource management system, human resource planning is regarded as a component or element of HRM concerned with the acquisition and assessment of the workforce.

It serves as a foundation for the management of human resources effectively and efficiently.

10 Importance of Human Resource Planning

Human resource planning aims at fulfilling the objectives of the human resources requirement. It helps to mobilize the recruited resources for productive activities.

Human resource planning is an important process aiming to link business strategy and its operation. The importance of human resource planning is as follows:

1. Human resource planning determines the future needs of human resources in terms of number and kind.
2. Human resource planning is important to cope with the change associated with external environmental factors such as technological, political, socio-cultural, and economic forces.
3. Another purpose of HR planning is to recruit and select the most suitable personnel to fill job vacancies.
4. Human resource planning/human resources planning helps find out the surplus/ shortage of human resources.
5. It is helpful in employee development through various training and development campaigns to impart the required skill and ability in employees to perform the task efficiently and effectively.
6. It focuses on the optimum utilization of human resources to minimize the overall cost of production.
7. Another importance of human resource planning is that it reduces labor costs substantially by maintaining a balance between the demand for and supply of human resources.
8. An effective human resource plan provides multiple gains to the employee through promotions, increases in salary, and other fringe benefits. This boosts employee morale.
9. It is useful in finding out the deficiencies in the existing workforce and providing corrective training.
10. Another importance of human resource planning is the safety of health. It provides for the welfare, health, and safety of its employees, leading to an increase in employee productivityin the long run.

In a word, Human resource planning is helpful in the overall planning process of the organization. It is essential for businesses because of the reasons shown above that have been elaborated very effectively.

10 Benefits of Human Resource Planning

Human Resource Planning has assumed importance in recent years for the following reasons;

Nature of Human Resources

The nature of human resources necessitates human resource planning. Human resources have four critical features.

• First, for higher skills, a very long time is required for workers to achieve full productivity.
• Second, a person generally achieves higher productivity the longer he is on the job.
• Third, a person’s mental satisfaction affects his productivity.
• Lastly, investment in human beings belongs to the individual who may take his skills where he goes.

Supply of Skilled Manpower

Talented and skilled human resources have become scarce resources and are always in short supply. Human resources planning is necessary for the long-run survival of the business firm.

Rapid Technological Change

Jobs and job requirements are changing faster than in earlier periods. The pace of technological change has accelerated.

The direction of technological change has decreased jobs for unskilled workers but has increased the demand for new skills. Technological change makes re-training a must for many current jobholders.

Costs of Recruitment and Hiring

Highly skilled personnel are in short supply, and it is very costly to hire and maintain them.

Recruitment and training costs, pensions, gratuity, provident funds, and other fringe benefits raise the costs of hiring a new worker. Higher recruitment costs encourage upgrading from within.

Increased Mobility

Increased mobility of human resources has created a problem for management to retain qualified employees. There is nothing to keep the worker from moving on when another job appears attractive.

As a result, individual employers face greater difficulties in holding preferred employees. Proper workforce planning will reduce the rate of turnover.

Reduction of Wastage

A proper workforce policy will reduce the wastage rate. It is also referred to as ‘labor turnover‘ or ‘attrition rates.’ Wastage rate is determined in a variety of ways;

1. It is less among older employees,
2. It is less among longer-serving employees,
3. It is less among the more highly skilled because they are properly placed, and
4. It is less among men than women.

Human Resources as Corporate Assets

Staffing planning stresses the value of human resources as corporate assets.

Management has learned that if it neglects the individual, he is not likely to develop into the kind of performer that the firm wants.

Size of the Firm

Interest in human resources planning is increasing because the organization’s size is continually increasing.

Staffing planning helps the company have the workforce it needs to achieve its objectives and use its human resources to optimize employee satisfaction.

Profitability

In a profit system, the basic motivation for human resources planning, like all other firm activities, would be its contribution to profitability.

Employee productivity is a major factor in profitability and has stimulated interest in the rationalization of work and incentive systems to motivate the worker.

Management Development

Proper human resources planning can ensure the development of managers through proper training programs.

Requirements for Effective HRP Successful HR planning requires:

• HR personnel understand the HR planning process,
• Top management is supportive,
• The communications between HR staff and line management are healthy,

The HR plan is integrated with the organization’s strategic business plan.

9 Purposes of Human Resource Planning

The general purpose of human resource planning has been described, but there are specific purposes in crucial areas of management that HR planning serves:

Let’s explain the 9 purposes of human resource planning.

Determining recruitment needs

An important prerequisite to recruitment is avoiding unexpected shortages, wastage, blockages in the promotion flow, and needless redundancies.

Determining training needs

Planning training programs are critical. These programs improve not only quantity but also quality in terms of the skills required by the organization.

Management development

A succession of trained and experienced managers is essential to the organization’s effectiveness. And this depends on management development by providing accurate information about the present and future requirements in all management posts.

Balancing the cost between the utilization of the plant and the workforce

Cost balancing includes comparing costs between these two resources in different combinations and selecting the optimum. While costing projects, cost balancing plays an important role.

Industrial relations

The business plan will, of necessity, make assumptions about human resource productivity. It will have an impact on the organization’s industrial relations strategies.

Consider future workforce

Organizations use strategic planning to achieve goals. This relates to the organization’s vision, mission, and strategic objectives. An organization must analyze its future employment needs.

If an organization decides it must increase productivity by 25 percent, it may need to grow its workforce by 2 percent. It must consider human resource requirements if an organization wants to increase market share by moving offices into new locations.

Analyze Current Workforce

With future workforce needs to be considered, human resource planning must analyze the competency of the present workforce. Comparing future needs with current workforce strengths and abilities will identify gaps or surpluses.

Future Preparation

Considering workforce surpluses and deficits, human resources must prepare action plans for the workforce.

This includes identifying the type and number of employees needed, employee competency, budget considerations, recruiting and retaining measures, and employee development and training.

Evaluation Process

Ensuring the future workforce is meeting objectives requires an evaluation process. This will determine if the workforce is adequate to satisfy strategic goals. Planning for this process now will more easily and quickly identify future workforce gaps or surpluses.

In practice, HR planning is concerned with the demand for and supply of labor and problems arising from reconciling these factors. Plans and decisions of any system follow the analyses of demand and supply.

9 Factors That Affect Human Resource Planning (Determinants)

Human resource planning can be defined as identifying the number of people required by an organization regarding quantity and quality.

All human resource management activities start with human resource planning. So we can say that human resource planning is the primary activity of human resource management.

A manager should consider the following factors when he or she makes human resource planning:

Employment

HRP is affected by the employment situation in a country. In countries with greater unemployment, there may be more pressure on the government to appoint more people.

For example, public sector enterprises are highly overstaffed in some countries, while few private enterprises are understaffed.

Similarly, some companies may have a shortage of skilled labor and may have to appoint people from other companies.

Technical changes in society

Technology changes quickly, and new people having the required knowledge are required for the company.

In some cases, the company may retain existing employees and teach them new technology; in some cases, the company has to dismiss existing people and appoint fresh ones.

Organizational changes

Changes take place within the organization from time to time.

For example, a company may diversify into new products or close down businesses in some areas. In such cases, a company may hire or dismiss people according to the situation.

Economic factors

The most immediate concern in human resource planning is how much money is available for salaries, training, and equipment.

However, external economics plays an equally critical role.

For example, people do not have much money to spend in an economic recession and tend to be much more selective in what they buy or the services they use.

This means some industries, such as those producing luxury items or non-essential services, sell less and may even have to lay off some staff.

This, in turn, makes the local economy even more difficult.

Social factors

Social factors may influence the organization’s HR planning. There is a clear discrepancy between one social group. It’s a good idea to build in ways of opening up new opportunities.

Technological factors

New technology brings new skill requirements, so companies must always be aware of proficiencies and training needs when planning human resources.

New products and services also may require recruiting highly skilled employees or training existing employees to meet the need.

Legal factors

Employment law is the most significant sector of the legal system that affects human resource planning, and it changes all the time.

HR managers must keep themselves up to date and have an employment law specialist available to consult if necessary. Employment law changes must be reflected in company policy.

Environmental factors

Environmental factors might include where the business is located, finding appropriate staff, or changes to the environment that mean a need for more or fewer employees.

A simple example of environmental factors affecting human resource planning is the consideration of how the employees get to work safely during extreme weather; the Firm’s plan may need to include the possibility of telecommuting to keep everything going.

Labor market

The labor market comprises people with skills and abilities that can be tapped when needed. Although in many 3rd countries with surplus labor, there is a shortage of skilled people. We should take measures to make more skilled workers available in the country.

When one talks about labor supply, the following deserve due consideration: the size, age, gender, and educational composition of the population, the demand for goods and services in the country, the nature of production technology, and the employability of the people.

5 Stages of Human Resource Planning

1. First Stage

The first stage of human resources planning is integrating it with corporate planning. All human resources plans stem from business plans to a corporate strategy. There are mainly three types of business plans:

1. Plans to change the level of activity,
2. Plans to change the nature of the activity, and
3. Plans to change the organization of activity.

2. Second Stage

The second stage in HR planning is to forecast or assess the gross human resources requirements anticipate the company’s future program, and translate these into talent and skill requirements.

Most companies plan for the future growth of the business.

The workforce forecast is concerned with anticipating the number of replacements required due to;

1. resignations,
2. retirements,
3. death,
4. dismissals,
5. transfers, and
6. promotions.

Determining the company’s staffing requirements involves two projections for each functional area;

1. The incremental number of positions needed as a result of growth, and
2. The number of vacancies created by retirements and terminations.

3. Third Stage

The third stage is to develop a phased program for recruitment and training. The phasing has to be related to the phasing of the construction and operation of the various units of a plant.

People must be provided with opportunities to develop themselves. People change jobs for definite reasons such as higher pay packet, better chances of promotion, or better job satisfaction.

Generally, the right types of people are attracted to firms that offer opportunities for development to the individual.

4. Fourth Stage

The fourth stage of human resources planning is concerned with allocating human resources within an organization over time – in other words, assigning individuals to jobs that are appropriate to their talents and needs and the organization’s requirements.

Once an individual is on the job, he can be developed. He may be rewarded for good performance as an incentive for future good performance and development.

5. Fifth Stage

The last stage of human resources planning is to locate the sources from where personnel required will be available. Broadly the sources can be divided into two:

1. recruitment from outside and
2. recruitment from within the organization.

Organizations can hire personnel from internal and external sources. The skill inventories method is one of the techniques used to keep track of internal supply. Skill inventories are manual or computerized systems that keep records of employee experience, education, and special skills.

A forecast of the supply of employees projected to join the organization from outside sources, given current recruitment activities, is also necessary.

7 Steps of HR Planning Process

Human resource planning is a process through which the company anticipates future business and environmental forces. Human resource planning assesses the human resources required for a future period. It attempts to provide sufficient staffing required to perform organizational activities.

HR planning is a continuous process that starts with identifying HR objectives, moving through analysis of workforce resources, and ends at the appraisal of HR planning.

Following are the major steps involved in human resource planning:

Integration of HR planning with corporate planning

The HR planning process begins with considering organizational objectives and strategies. The first stage of HR planning is to integrate it with corporate planning. All staffing planning stems from business plans with a corporate strategy.

Assessment of environmental factors

The second stage in HR planning is to forecast or assess the internal and external environmental factors that affect the demand and supply of labor.

Some of the most significant environmental factors are government influences, economic environment, geographic and competitive conditions, technological factors, workforce composition, management philosophy, and work patterns. There are several techniques now available for doing HR forecasts.

The most important techniques, among others, are the Delphi technique, Brain Storming, Nominal technique, Committee Board, Expert opinion, Consultancy, Trend analysis, Regression, and Correlation Analysis.

Assessment of human resources

The assessment of HR begins with environmental analysis, under which the external and internal (objectives, resources, and structure are analyzed to assess the currently available HR inventory level.

After the analysis of the external and internal forces of the organization, it will be easier for an HR manager to find out the internal strengths and weaknesses of the organization on the one hand and opportunities and threats on the other.

Moreover, it includes an inventory of the workers and skills already available within the organization.

Demand forecasting

HR forecasting is the process of estimating the demand for and supply of HR in an organization.

Demand forecasting is a process of determining future needs for HR in terms of quantity and quality. It is done to meet the future personnel requirements of the organization to achieve the desired level of output.

Future human resource needs can be estimated with the help of the organization’s current human resource situation and analysis of organizational plans and procedures. It will be necessary to perform a year-by-year analysis for every significant level and type.

Forecasts of demand may be either judgmental or mathematical. The HR forecast is concerned with anticipating the number of replacements required due to resignations, retirements, death, dismissals, transfer and promotions, and technological changes resulting in increased productivity.

This highlights shortage and overstaffs positions.

Supply forecasting

Supply is another side of human resource assessment.

It is concerned with estimating the supply of workforce given the analysis of current resources and future availability of the human resource in the organization. It estimates the future sources of HR that are likely to be available from within and outside the organization.

The internal source includes promotion, transfer, job enlargement, and enrichment, whereas the external source includes recruiting fresh candidates capable of performing well in the organization.

Matching demand and supply

It is another step of human resource planning. It is concerned with bringing the forecast of future demand and supply of HR.

The matching process refers to bring demand and supply in an equilibrium position so that shortages and overstaffing positions will be solved. In case of shortages, an organization has to hire the more required number of employees.

Conversely, in the case of overstaffing, it has to reduce the level of existing employment. Hence, it is concluded that this matching process gives knowledge about requirements and sources of HR.

Action plan

It is the last phase of human resource planning, which is concerned with a surplus and shortages of human resources. Under it, the HR plan is executed by designing different HR activities.

The major activities required to execute the HR plan are recruitment, selection, placement, training, development, socialization, etc.

Finally, this step is followed by control and evaluation of the performance of HR to check whether the HR planning matches the HR objectives and policies.

This action plan should be updated according to change in time and condition. HRP is concerned with the allocation of human resources within an organization over time.

Conclusion

Human resource planning is the process of determining its human resource needs and optimum use of an organization’s human resources.

Human resource planning is one of the most important elements in a successful human resource management program.

Because it is a process by which an organization ensures that it has the right number and kinds of people, at the right place, at the right time, capable of effectively and efficiently completing those tasks that will help the organization to achieve its overall strategic objectives.

Human resources planning then ultimately translates the organization’s overall goals into the number and types of workers needed to achieve those goals.

Without clear-cut planning and a direct linkage to the organization’s strategic direction, estimating an organization’s human resource needs is reduced to mere guesswork. This means that human resource planning cannot exist in isolation. It must be linked to the organization’s overall strategy.

So for achieving optimum use of an organization’s human resources, a systematic process of human resource planning is essential.

Following our deep dive into human resource planning; use our total guide on human resource management.

Muntasir Minhaz Muntasir runs his own businesses and has a business degree. Founded iEduNote.com and writes on various business subjects.