The human resource planning process consists of five steps, namely, demand forecasting, supply forecasting, auditing, reconciliation and control.
Demand Forecasting – The HR planning process starts with demand forecasting which essentially means forecasting both the number and the type of employees that an organisation is going to require in the medium to long term future. This obviously requires a pretty in-depth understanding of both the organisation and the market in which it operates. The aspects of the organisation that will affect the demand for employees are its future plans and strategies and how these stand in relation to the existing employee base.
The aspects of the market that will affect the demand for employees are the status of the economy i.e. whether or not it’s in the grip of a recession, the levels of competition faced, labour market trends and things like this. Adequately forecasting demand is important because it greatly affects the organisations profitability. If there are too many workers, the wage bill will be unnecessarily high but if there are too few workers than possible opportunities cannot be seized upon.
Supply Forecasting – This step is concerned with correctly assessing the capabilities of the existing staff in
order to determine whether the organisation can meet the forecasted demand as it stands. This is done through inventory analysis which consists of both establishing a skill inventory and forecasting future changes to it. A skill inventory is simply a detailed record of who works for the company and what they are capable of. This enables HR personnel to establish what role each employee can take in meeting the organisations future demands for labour. Forecasting future changes to the inventory is establishing likely resignations, retirements, leaves, transfers and the like and analysing the impact that they will have.
Auditing – This step of the HR planning process primarily involves analysing the results of the previous two steps. By analysing both the current supply and future demand of employees, areas of shortage or surplus can be identified. While this is the main aspect of this step, there are other activities carried out during the auditing step. It also involves establishing why resignations have taken place, how much such resignations are costing the organisation in terms of the skills and experience of employees that are leaving and how much it is costing to find replacements. If it then established that resignations are costing the organisation too much, means are established to prevent future resignations. The effectiveness of the organisation in areas such as recruitment and training is also analysed and again future changes established if it they are seen to be lacking.
Reconciliation – This step involves establishing the actions that need to be taken in response to the audit. The actions that are taken will obviously depend on the result of the audit. If a company is already performing optimally from a HR perspective then this step could be very light. If there is a large difference between forecasted supply and demand however a lot of action may need to be taken and it could take some time to rectify the situation. There are various actions that can be taken and they include:
- Establishing and implementing strategies to recruit new employees
- Establishing and implementing strategies to lay off existing employees in the event of a surplus
- Revitalizing existing training and development plans in an effort to ensure that the organization continues to have an adequately sized and skilled workforce.
- Identifying what employees are truly key to the organisation through both career analysis and planning and succession planning.
- Radically altering current work practices such as work schedules and overtime policies.
An important aspect of this step is considering the implications of any actions that are taken. For a start, labour legislation must be followed and trade unions must be negotiated with if there are objections. Areas such as lay-offs and overtime are often heavily affected by both. There is also the question of whether the organisation currently has the resources required to make the changes that the audit has deemed necessary.
Control – The last step of the HR planning process is controlling and monitoring the implementation of the newly generated HR plan. This involves ensuring that the proposed changes do indeed come about and within the schedule that the HR plan dictates. Due to the fact that both the demand and supply of labour is constantly changing, a good HR plan will include mechanisms to ensure that necessary revisions are made well in advance of when they are needed. Part of the last step is to ensure that such mechanisms are indeed working and hence the final step is essentially ongoing.