Handout 1: Human Resource Planning

 Human Resource planning sees to it that the company can achieve its mission and vision by
having the right people with the right skills in the right departments at the right time.
 The strategic objectives of the organization in the different functions are accomplished with the
employment of people suited for the different tasks assigned to each department
 The human resource planning process is divided into four stages: environmental scanning;
forecasting human resource requirements; decision analysis; and action plans/program
implementation.
 The human resource manager needs to be guided of the following: the HRP team, current and
long-term workforce requirements, the evaluation of the present roster of personnel in the
company, and the assessment of the external labor environment which can affect the future
supply of employees.
 Information that forecast external supply is made available through private websites and
government agencies.
 The methods of forecasting internal labor supply are as follows: trend analysis,
skills/competency models, replacement chart, succession planning, staffing tables, and Markov
analysis.
 The quantitative methods of forecasting HR demand are trend analysis, ratio analysis, and
regression analysis.
 The main types of qualitative techniques are as follows: Delphi method, nominal group
technique, and scenario analysis.
 Decision analysis identifies three crucial decisions: labor equilibrium, labor shortage, and labor
surplus.

It is difficult to imagine how a company can continue functioning without human resource planning
(HRP). To accomplish its mission and vision statements, which are specifically highlighted in its strategic
objectives, a company should effectively employ and utilize human resources – manpower – in all
aspects of its operations.

HRP means devising plans, strategies, and tools to provide the right number of people with the right
skills and qualifications at the right time. It is critical to highlight the link between human resource
planning and the overall strategies of the organization. The former specifically determines the demand
and supply of people in the organization.

HRP sees to it that the company can achieve its mission and vision by having the right people with the
right skills deployed in the right departments at the right time. One department cannot function
independently or avoid coordinating with the other functional departments. The number of people as
well as their skills, abilities, experience, and educational background will always matter to the other
departments since human resource is a core resource. The accomplishment of the company’s strategic
objectives is always grounded on the following: quality product/service offerings, a highly reputable
corporate image, and competent and reliable personnel.

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 Research &
Finance Marketing Technical Production
Development

HUMAN RESOURCE PLANNING

Manpower demand and supply (number, skills, and qualifications)

Link between Strategic Planning and Human Resource Planning

The strategic objectives of the organization in the different functions are accomplished with the
employment of people suited for the different tasks of each department. As mentioned in the
Introduction, HRP has three components: coordination, concentration, and consideration. These
provide the framework by which human resource planning accomplishes its tasks as a key function in
HRM.

COORDINATION

Bulla and Scott (1994, cited in Armstrong, 2009) define HRP as “the process for ensuring that the
human resource requirements of an organization are identified and plans are made for satisfying those
requirements.” Reily (2003, cited Armstrong, 2009) describes it as “the process in which an organization
attempts to estimate the demand for labour and evaluate the size, nature, and sources of supply which
will be required to meet the demand.” The HRP process is summarized in the following diagram.

Forecasting
Environmental Decision Action Plan/Program
Human Resource
Scanning Analysis Implementation
Requirements
 Surplus
Demand-Supply GAP Analysis  Shortage
SWOT Analysis Analysis  Labor Equilibrium

A. ENVIRONMENTAL SCANNING

Environmental scanning is critical to HRP because it assesses the factors that presently
affect the labour market as well as the ability of the company to respond to these factors.
Examples are:

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 1. The current economic conditions have a great impact on the labour market. If
unemployment is generally high, it will be relatively easy for an organization to get
an inexperienced, new graduate for a customer representative position.
2. An increase in minimum wage, for instance, may deter a company from hiring new
employees at the moment due to budgetary considerations.
3. Organizations may now be particular about educational background, rather than
experience. A master’s degree is now a must for promotion purposes or for better
pay.
4. Technological breakthroughs may decrease labour demand to a previously labour-
intensive company.

As a process, HRP looks at the organization’s strengths, weaknesses, opportunities, and

threats (SWOT). SWOT reveals the current strengths of the organization and how they can be
maintained in terms of its market position or standing; how its products /services fare in the
market; and how its weakness in its current distribution set-up can reduce personnel capability
to transport its products in certain key cities. In terms of opportunities, there is a big chance for
the company to succeed in a new branch or area, even if the likelihood of failing or getting
surpassed in another area is not far behind. SWOT analysis can spell the difference between
getting new personnel, retaining the same number of people, or laying off some employees. It is
very critical in planning out the organization’s manpower complement. The term describes how
many people are currently employed in the organization. It also describes how many personnel
occupying different positions are in each department.

B. FORECASTING HUMAN RESOURCE REQUIREMENTS

Forecasting refers to the decision maker’s perception of a certain behaviour based on an
objective study of the factors affecting the perceived behaviour. In short, this is making
predictions based on critical factors to come up with a key decision. Predictions on human
resource requirements are an example.

CONSIDERATION

During the second stage of the HRP process, there are certain considerations that the HR should
deal with. To be successful, there is a need for an HR manager to be guided by the following
information;

1. The Human Resource Planning (HRP) Team

It should consist of individuals across all levels and departments who understand the value of
HRP in the organization. Once chosen, they should commit themselves to the execution of the plan.
The following personnel should be considered in the HRP team:

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 a. Senior members of top management – provides the necessary support and the “go ahead”
signal to execute the plan.
b. Department managers – assist in analysing the human resource requirements and aligning
them correctly in the organization.
c. HR support professionals – are the support group that ensures that all department managers
are provided with all the help they need to implement the process.
d. Information technology (IT) professionals – undertake the process automation.
e. Finance/Budget analysts – make the necessary linkages between human resource
requirements and the corresponding monetary limitations.

2. Current and Long-term Workforce Requirements

During HRP, there are certain changes that have to be made on the current workforce.
The HR department should replace those who are due for retirement; consider those who can
be promoted; and look into current vacancies that need to be filled immediately.
It is also important to be concerned with long-term workforce requirements. During
HRP, a succession scheme becomes crucial to key management positions. Employees who have
the potential to assume key positions later on should be identified and honed further to be
future executives in the organization. HRP also looks into the skills that may be needed by the
employees in the future, working hand in hand with schools which offer specific courses that are
required for the company’s betterment in the coming years.
The beauty of HRP is that it not only takes charge of future human resource
requirements but also equips employees with skills that may be needed to attain the company’s
organizational goals.

3. Evaluation of the company’s current roster of personnel

There is a need to assess how many regular or full-time employees and part-time or
temporary workers there are in an organization. The group of temporary hires is called
contingent workers. In evaluating the workforce, a skills inventory is needed. It entails
comprehensive information on an employee’s educational background, experience,
compensation history, and specialized skills.

4. Assessment of external labour environment which affects the future supply of employees

The external environment is evaluated on the basis of the average number of graduates
and the corresponding courses per year, as well as the average age of the labour force. It is also
imperative to identify what industries are labour-intensive and which among them grow faster
in terms of profitability, as this can also affect the number of workers employed.

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 a. Forecasting external supply – it is necessary to determine potential employees from
information available in government offices such as the DOLE and NSO. There are
also private websites where one can access employment statistics and industry
data. The information gathered from these sources can help in understanding
future HR supply.
b. Forecasting internal supply – on the other hand, there are actuarial losses which are
unavoidable in any organization. Actuarial losses refer to life events like death,
disability, and retirement. An organization can plan these life events through a
study of occupational health risks, medical histories of employees, and other data
related to the average age of the incumbent workforce. The term turnover refers to
the total number of employees leaving the organization divided by the total number
of employees in an organization. There are two kinds of turnovers: voluntary and
involuntary. A voluntary turnover refers to resignations which are initiated by
employees. An involuntary turnover refers to dismissals and layoffs initiated by the
employer.

Methods of Forecasting Internal Labor Supply

 Trend analysis. It is a simple method used in forecasting internal HR supply.

The main requirement in using trend analysis is a record of past trends. Future
trends can be predicted easily through past retirement, hiring, and turnover
patterns. The advantages of using trend analysis are that it is easy and
inexpensive. Information on past trends can be accessed without difficulty as
long as yearly HR audit is done in the organization. However, trend analysis is
limited to organizations with stable HR trends. In complex organizations, trend
analysis cannot be used alone. It can only be used as a preliminary step in
understanding the current workforce better. Another disadvantage is that in its
simplicity, it can ignore or overlook significant events which have occurred
during the present year or recent years.
 Skills/Competency models. Based on the information gathered from the skills
inventory, the skills/competency model matches the skills and competencies
needed for each job with those of the employees in the organization.
Competency includes skills, abilities, knowledge, and personal attributes and
traits which are needed for a particular position and the required tasks in such a
position. Usually, an organization considers the top performers and compares
them to other employees. The advantage of using this model is that it provides
a good picture of the competencies of the employees which helps in setting up
an ideally competent workforce in the future. This kind of competency model is
also less costly and fairly easy to employ. Its advantages are that there is no
guarantee that the past information contained therein is valid. Failure to obtain
accurate information in the past audit will make the competency model useless.

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  Replacement chart. It is used to identify vacancies in superior positions and the
possibility of filling those vacancies current employees through horizontal or
vertical movements. In horizontal movements, also called lateral movements,
employees are transferred to another position but of the same level. Vertical
movements refer to promotions or the advancing in position such as from a
supervisor to a manager, or from production operator to a supervisor. The
advantage of this method is that it clearly identifies the top performers and the
vacancies they can fill in the organization. Another advantage is the
organization’s easy identification of a person who will fill a particular position in
the future and the time to adequately prepare people who will replace those
leaving the superior positions. The disadvantage is that it can only be applied to
internal movements.
 Succession planning. Succession planning is a long-term process since grooming
a successor entails training, mentoring, and coaching the potential employee
until the time that he/she assumes the key position. Its advantage is that it
adequately prepares successors to assume key positions. Its disadvantageous
and expensive to hone and train a potential leader who may decide to leave the
organization sometime in the future for a better pay or position elsewhere.
 Staffing tables. Staffing tables help the organization predict HR internal supply
by assuming a constant mix of employees in the organization. Using the chart,
the organization can make adjustments concerning the predicted number of
employees in the future. However, numbers do not indicate anything, making
staffing tables mere preludes to more complex forecasting methods.
 Markov analysis. It forecasts internal movements from one year to the next
year by determining the percentage of employees who remain in their jobs, are
promoted, transferred, dismissed, or have resigned for the organization. This
type of analysis identifies areas of high turnover so the organization can focus
on the probable causes and how they can be minimized. The Markov analysis is
useful in identifying how many are likely to be promoted so that the
organization can prepare for possible vacancies created by those who will be
promoted. On the other hand, Markov analysis may underestimate the size of
the organization and such a mistake will lead to a failure in forecasting.

CONCENTRATION

The concentration of efforts is very crucial in the organization’s achievement of its strategic
objectives. In determining the shortage or surplus of manpower, it is very important to forecast future
requirements.

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FORECASTING HR DEMAND

There are a number of quantitative and qualitative methods of forecasting HR demand. The
three types of quantitative techniques are the following: trend analysis, ratio analysis, and regression
analysis.

1. Trend Analysis. It predicts demand for personnel based on past trends over a number of years
between an operational index (revenue per employee, productivity per employee, and the
demand for labour). Critical to the use of trend analysis id the choice of an operational index.
The common practice is to have five of historical years’ worth of historical data for trend
analysis. Trend analysis makes forecasting HR demand easy. It is also not time-consuming since
the historical data are available at HR’s discretion. Furthermore, it is inexpensive since there are
new software’s and systems that can perform it. However, trend analysis is based on only one
criterion. Another disadvantage is that it may be subjective, depending on the discretion of the
one doing the trend analysis on the choice of operational index.
2. Ratio Analysis. It predicts HR demand based on ratios between selected factors and the number
of employees needed. It is assumed that each level id fixed. The advantage of using ratio
analysis is that there is no need to get five years’ worth of historical data to forecast HR
demand. It is also easy to use. Previous sales information is readily available to predict HR
demand. Ratio analysis is very useful for benchmarking purposes within the industry. However,
ratio analysis may predict inaccurate sales growth. It is always good to be conservative in
predicting sales growth since there are uncertainties in the environment that may affect sales.
3. Regression Analysis. It is a statistical method of predicting HR demand by determining the
relationship between various factors (independent variables) and the company’s employment
level (dependent variables). Regression analysis is advantageous because it predicts the effect
of a particular factor on a number of employees. As a result, the company can think of ways to
improve the workforce in the future. Biases and subjectivity are removed since it uses
mathematical formulas to make predictions. This method is difficult for it may take some time
to fully use and understand the data generated by regression softwares. Management should
perceive proper training on how to interpret the data.

The main types of qualitative techniques are the following: Delphi method, nominal group technique,
and scenario analysis.

1. Delphi Method. This method uses a panel of experts to project the number of personnel through
various factors such as economics, demographics, and the technological and social conditions of
the environment. There are internal factors used such as educational background, experiences,
and productivity of the workforce. The Delphi technique uses a “middle person” to gather the
data of each of the members of the panel who are assigned to make manpower forecasts. The
role of the middle person is to summarize the comments of the panel. The process continuous
until a consensus is reached. The Delphi technique is ideal because judgments come from a
panel of experts and sources of information are verified before they are used during
deliberation. However, the process is time consuming and somewhat subjective in nature.

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 Another disadvantage is that some experts cannot help but disclose their judgments to others,
especially when they are working in close proximity to one another.
2. Nominal Group Technique. It uses a panel of experts, mostly line managers, who discuss, meet
face to face, and project HR demand. Advantageously, the panel of experts will strive very hard
to come up with an accurate forecast. Also, the assessment can lead to solving other
organizational issues. The disadvantage of this technique lies in the subjectivity of the
assessment of the experts. Biases cannot be avoided when assessments are done by people. It
is also time-consuming since discussions are done until confidence in the results is obtained.
3. Scenario Analysis. This method applies multiple scenarios to predict HR demand, based on a
number of assumptions. Because of the unpredictability of the future, an organization may opt
for different scenarios, each with corresponding predictions based on the characteristics of a
particular situation. This method is beneficial because it provides different scenarios which
make the organization very flexible in facing the future. It is also very useful when past trends
do not necessarily become the best predictors of the future. It is also advantageous in an
environment which continues to change. Anticipating different scenarios can safely lead the
organization to future exigencies. There is one caveat: the organization must keep on
monitoring factors that influence the scenarios created.

C. DECISION ANALYSIS

During this stage, HR conducts a gap analysis – the process of finding the difference between
the forecasted HR supply and HR demand. Decision analysis identifies three crucial decisions: labor
equilibrium (where HR demand equals HR supply), a shortage of workers (where HR demand is more
than HR supply), and a surplus of workers (where HR supply is more than HR demand). Labor
equilibrium is an ideal situation but this happens rarely.

D. ACTION PLAN/IMPLEMENTATION OF THE PROGRAM

After the gap analysis and a particular decision is obtained (e.g., a labor equilibrium, shortage, or
surplus), the organization is now ready to identify the strategies for its implementation.

a. Labor equilibrium or labor demand equals labor supply

During labor equilibrium or status quo, current employees are trained and
develop further in their respective fields. There are also instances when employees are
transferred from one department to another based on their experience and educational
background.

b. Labor surplus or labor supply is more than labor demand

The company has several options when there is a labor surplus. When this
occurs, the company looks at the attrition rate of the employees. Attrition is the normal
separation of employees from the organization such as resignation or retirement. The
company may opt to offer an early retirement program for those who have reached the

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 age of fifty. An early retirement package should be planned carefully in order for it to
effectively entice people. A higher separation pay will enhance the offer’s appeal.
Another option is to declare a hiring freeze. A hiring freeze prevents new hires and
assigns qualified incumbent personnel to fill job vacancies. Layoff is another option of a
company that wants to get rid of redundant positions since some manual services or
functions may no longer ne needed because of technological innovations. When a layoff
occurs, the company reviews the performance of its current workforce and may decide
to terminate employees with consistently low performance ratings for the past several
years.

c. Labor shortage or labor demand is more than labor supply

There are several ways to address labor shortage. The first option is to schedule
overtime work hours. This is an additional cost top the company, but it may help in avoiding
work backlogs on a temporary basis. Another option is to hire contractual/temporary or
project-based works. There are workloads or projects that will last only for a short time like
six months. Temporary workers can be hired. Another option is to outsource the work.
Instead of hiring directly, a company may use a third party and let the latter get its own
people to do the tasks such as customer service. A possible option is to tap top performers
for promotion. This can motivate the workforce to perform well always.

Lastly, a labor shortage can be solved by external recruitment. There are several
methods on how to recruit the best people qualified to fill the vacancies in the organization.
Once the company chooses a particular strategy based on the three scenarios, the
organization prepares a budget and provides a working plan on how to implement the
chosen strategy.

Historical Background of HRM in the Philippines

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 Human resource management started when western capitalist view personnel management
seemed not conducive in the twentieth century, as when Information Age dominates the world of
business. Historically according to Oliver Sheldon, personnel management was "labor management".
Personnel management has limited role only pattern in Industrial Age, where people work more in mass
production and the management invest much on machineries rather than towards human asset. The
welfare of people is not as important as making profit. Human resource management is the new
practices which obliterate traditional personnel management functions, shouldered broader
responsibilities for the welfare of its people that make it as integral part of the strategic development of
the organization. The history of human resource management in the country is short and not so
detailed. It is a relatively new discipline in the Philippine history.
In pre-Spanish and Spanish occupation, the "mayordomo system" of the foreign groups took on
a master-servant type of relationship with no written codes used as guidelines. Although there was
some commerce between Manila and Spain through Mexico, business organizations were very loose and
management-labor relations and personnel management was not known and was unheard of. The
relationship that existed was between master and domestic servant or laborer. The plight of the workers
who were treated like laborers was lamented due to the absence of labor laws that regulated
employment. At that time, the natives were generally illiterate. Thus, they were veritable preys to
abuses.
The labor conditions during the American period, though not forced and not as harsh as those in
the previous foreign regime, were far from being fair and just. Although, America gives importance to
raised education, there is no labor laws were passed against oppressed women and child labor
conditions. But America introduced “unionism” to anchor for protection of workers’ rights for the
farmhands and industrial workers, aside from oppressive working conditions, suffered from lack of
proper avenues for ventilating their grievances, exacerbated by their fear of losing their jobs.
In World War II, the anemic union movement was smothered temporarily. It decimated big
trade, business and industry activities and also a suspension of the normal educational system. Frenzied
efforts to rise from the war debris were exerted. However, after the rehabilitation work, attempts
toward specialization in various areas were registered and the movement permeated into personnel
management. Private and public organizations started to organize formally a department that addressed
personnel needs and added to the already organized departments of finance, production, marketing,
administration; such as the Department of Labor and Employment (DOLE), Government and Service
Insurance System (GSIS), Social Security System (SSS), the People Management of the Philippines
(PMAP), and other agencies which aimed to assist both management and labor sectors on employment,
training, security, benefits and services.
Although much knowledge about personnel or human resources management was imbibed by
individuals and organizations, practice fell short due to “suppression” of rights when Martial Law Period
(years when the late Philippine president Ferdinand Marcos exercise his dictatorial/authoritarian
powers) took place causes severe economic and financial setbacks due to international events and
exacerbated by national state of affairs. The political atmosphere and economic state of affairs were not
conducive to operationalize knowledge and implement policies.
However, the democracy was reinstituted; the exercise of freedom to participative law making
process through legislation for management and labor has begun; many laws have been passed in
protection for both sides of employer and employee to date; the Personnel Management Association of
the Philippines (PMAP) has exerted and shown leadership in many years in the professionalization of
human resource management through formal and informal training, and a giving-body award for most
human resources program that excel every year. PMAP is an association founded in 1956 to
professionalize human resources management. It pioneered also in promoting the profession of HR

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management in Asia with the holding of the first Asian Association of Personnel Management
Conference in 1973. (Pena, 2015)
In the education sector, schools on the tertiary level started to offer courses directly or indirectly
treating concepts on labor, manpower, human relations industrial relations and other related topics.
Through education, the development of human resourcing in the Philippines was emerging dramatically.
With the purpose and need to keep pace with the demands of local and international business
environment to become globally competitive, Commission on Higher Education (CHED) mandate Higher
Education Institutions (HEIs) offering Bachelor of Science in Commerce (BSC) to adapt “Bachelor of
Science in Business Administration” (BSBA) that also covered specialization on course program like
Human Resource Development Management (HRDM). (CHED Memorandum Order No. 39, Series of
2006)
Beforehand, human resourcing is already been practice prior in this mandate. For example,
many practitioners like psychology graduate has slide to this field of work where most companies hired
them merely to assess candidates’ behavior and personality. Not only psychologist has done
contributions to human resourcing but also to those HR practitioner who earned their HR work relevant
experience from their employers who somehow vested them the duties and responsibilities of a human
resource. And yes you read it right; there is no preferred background for you to become a legit human
resource. Yes, you can be a human resource from nobody to somebody. So don’t be surprised if your HR
has a baccalaureate degree on I.T., AB Journalism, BS Accountancy, or Political Science or any various
educational backgrounds you know. It happens not by accident but by different factors: such as due to
urgency, the appointing power of employer will give you the right to fill up the position because nobody
is available to do it and all you know nothing what you are going with, or you are just got lucky because
you complement with HR’s core competency based from your coursework or work experience. Still, the
complexity of human resource management services calls for more professional qualifications not just
having a college degree but backed up by sound knowledge and apt skills in human behavior. A human
resource specialist is required since it hires key positions that run the business.
As discussed above, the history of human resource management is a product of its various
events and influenced by most of the capitalist from local and overseas. The economic, political, and
educational environment influenced various programs and services for manpower welfare. Today, the
current status of human resource is continually grow, spread and strengthen as the world academe,
government agencies and corporate world embrace the needs of human resourcing not only to provide
the organization with sustained competitive advantage but also as important strategic partner in
shaping the ideal human asset not only for collective organizational success but also in nations
competitive economic development.

Personnel Management

The precursor of the term human resource management is personnel management. In the early
days, the personnel function is confined to keeping records of employees. Personnel management is
merely an administrative and record-keeping function. Personnel management became HRM in
response to the increasing pressures most businesses were experiencing at that time (late 1970s) when
the world was slowly embracing technological changes and globalization. It came to a point that
businesses have to align all departments in a strategic stance to achieve organizational effectiveness.

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Human Resource Development

Human resource development (HRD) is one aspect of HRM that deals with training and
development. The aim of HRD is to have a dynamic, growth-oriented workforce. HRD helps in unlocking
the potentials of the employees and developing their skills and abilities. It includes employee training,
career development, performance management, coaching, succession planning, and organizational
development.

Human Capital Management

Human capital management (HCM) complements HRM as it focuses on providing a strategic

approach to managing a company’s staff. HCM helps a company organize a full-blown strategy even
before employees are hired until their exit. HCM also employs succession planning and talent
management. It takes note of what people can contribute to organizational success and strengthens the
importance of people as assets rather than as costs. It also emphasizes the role HR specialists as
business partners. It champions the idea that the strategic role of human resources is to create values
that are important in the achievement of organizational goals.

Talent Management

One aspect of HCM is talent management. It is the process of attracting highly skilled workers
and retaining them. The responsibility of attaining both of these processes rests on all managers in the
organization. Talent management involves key HR functions such as educational qualifications and skills,
experiences, training and potential and personal qualities of employees.

Knowledge Management

Knowledge management, on the other hand, is the effective and integrated approach to
identify, capture, evaluate, retrieve, and share a company’s information assets. Asides from documents
and databases, the biggest source of knowledge is the expertise of employees. Needless to say, HR
needs to take care of employees who provide the expertise and skills to meet organizational goals.

//rga.handout1hrm7/2/18 & 11/20/18

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