The ever-changing global competitive business environment demands that businesses must constantly analyze their human capital base to ascertain whether the skills available in the organization can match the competencies required to compete successfully in the market, hence the need to have human resource planning as part of the overall human resource planning strategy. In fact, organizations need to identify the number of people and the level of skills and expertise they should have to meet present and future business requirements.
Bulla and Scott (1994), defined workforce or human resource planning as the process for ensuring that the human resource requirements of an organization are identified and plans are made for satisfying those requirements. Reilly (2003) defined workforce planning as a 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. Quinn Mills (1983) defines workforce planning as a decision-making process that combines three important activities: identifying and acquiring the right number of people with the proper skills, motivating them to achieve high performance, and creating interactive links between business objectives and people planning activities.
Farnham (2006) stipulates that workforce planning is important because it encourages employers to develop clear and explicit links between their business and human resource plans and to integrate the two more effectively. Workforce planning, therefore, involves working through four issues:
- The composition and content of the workforce will be required to strategically position the organization to deal with its possible futures and business objectives.
- The gaps that exist between the future “model” organization(s) and the existing organization, including any special skills required by possible futures.
- The recruiting and training plans for permanent and contingent staff must be put in place to deal with those gaps.
- The determination of the outside sources that will be able to meet the skill needs for functions or processes that are to be outsourced.
For the workforce planning process to be successful, human resource professionals responsible for leading workforce planning initiatives should make sure to: designate a specific member of the HR team to manage the process, find a high-level executive to champion the plan, involve, key stakeholders in the workforce planning process, align the plan with the company’s strategic business plan, coordinate the workforce plan with succession planning and career development initiatives, and make workforce planning an ongoing activity, with continuous evaluation of changes in the internal and external environment that may affect the organization’s staffing needs. It’s worth noting that the following distinct analytical steps need to be taken in workforce planning:
- The supply analysis: it involves an analysis of an organization’s current labor supply.
- The demand analysis: it includes a review of future business plans and objectives.
- The gap analysis compares the differences in the supply and demand models and identifies skill surpluses and deficiencies.
- The solution analysis focuses on how to address gaps in current staffing and future staffing needs through recruiting, training and development, contingent staffing, and outsourcing.
Environmental Scanning
Scenario planning is an assessment of environmental changes that are likely to affect the organization; and as a result, a prediction can be made of the possible situations that may have to be dealt with in the future. The scenario may list a range of predictions so that different responses can be considered. In fact, the scenario is best based on systematic environmental scanning, possibly using PEST analysis.
Demand forecasting
Demand forecasting is the process of estimating the future number of people required and the likely skills and competencies they will need. The purpose of the demand model is to forecast the organization’s future workforce composition. This forecast should take into consideration a broad range of business issues, including new product lines, competitive forces, and expansion or constriction in global marketplaces, anticipated workforce availability within geographic boundaries, and myriad other issues. In fact, internal and external factors need to be considered in the demand analysis. Analyses of internal demand influences may focus on the following questions, among others:
- Will the current workforce, with minimal retraining, have the skill sets necessary to perform new duties with a new product line within the organization?
- Will current employees remain loyal to the organization if it has anticipated changes in mind?
Indeed, analyses of external demand influences may consider these questions:
- Is labour readily available that possesses the skills and abilities needed by the organization?
- What external pressures will change demand for goods and services that may ultimately affect internal business decisions and, thus, workforce planning needs of the organization?
The demand forecasting methods for estimating the number of people required is:
- Managerial judgment: this method requires managers of the organization to sit down, think about the future workloads, and decide how many people they need in terms of skills and competence.
- Trend analysis: ratio trend analysis can be used by the management to forecast the future labor needs of the company. Activity level forecasts are used to determine direct and indirect labor requirements for the organization.
- Work-study techniques: this technique can be used when it is possible to apply work measurement to calculate how long operations should take and the number of people required.
Supply forecasting
Supply forecasting measures the number of people likely to be available from within and outside the organization, having allowed for absenteeism, internal movements and promotions, wastage, and changes in hours and other conditions of work. The purpose of the supply model is to analyze the organization as it currently exists. thus, the supply of labor and skill sets that are vital to an organization. This analysis should encompass not only the number of employees and their skills but also factors such as workforce demographics and representation of protected classes.
A supply analysis also involves making projections of attrition, that is, due to resignations, retirements, internal transfers, promotions, and involuntary terminations over the planning horizon being used, so that attrition is taken into account in considering the future supply of labor and skill.
Gap analysis
The next step in the process seeks to compare the supply model with the demand model to identify gaps between the composition of the current workforce and future workforce needs. The workforce planning professional may want to categorize a variety of future scenarios and then select the future that is most likely to occur, with contingency planning for alternative futures. When conducting this analysis, the planner should identify the additional number of employees needed who have the requisite skill sets, as well as the employees who will no longer be needed due to limited skill sets
Solution analysis
After managers identified the gap, the next step is solution analysis. Solution analysis involves the development of strategies to close the gaps identified in the previous step. Approaches for meeting future workplace demands of the organization may include recruiting, training and retraining, using contingent staff, or outsourcing. The approaches selected will be dependent on whether the organization will need to expand, contract, restructure or rely on contingent staff to meet new workplace demands.
- When external staff is required to meet a workforce expansion due to demands of new product lines, expanded production or service offerings, or new geographic areas to be served, external recruitment may be the logical strategy to address gaps. Recruiting may also be required as turnover occurs, whether due to employees leaving to find other employment opportunities or to retirement.
- Training and retraining. Instead of filling the skills gaps through external recruiting, Human Resource Managers may choose the less costly solution of employee development, particularly for key high-value positions. Employee development builds on current intellectual capital, retains the corporate culture, and motivates and stimulates the workforce. As skill sets become obsolete due to new technology, new services, additional product lines, or other competitive forces, the organization should focus on updating the skills and capabilities of their employees as a critical workforce planning strategy.
- Contingent staffing. When the current number of employees or their skills sets are insufficient to accomplish the work, given the anticipated business future, contingent staffing may be used to fill that gap. This approach makes sense when the demand model indicates that the numbers of employees will vary significantly and cannot be leveled out through resource allocation strategies.
- Contract workers and consultants. Sometimes an organization may need workers who have specialized knowledge or expertise to help meet new business requirements. Independent contractors and consultants may be used to meet these special requirements.
Conclusion
It is worth noting that workforce planning is key and critical to delivering the overall strategy of the organization, and therefore, it must be done holistically to ensure that the required human capital is in place or well-equipped to meet future demands and changes in the business environment.
References
Bulla, D N and Scott, P M (1994) Manpower requirements forecasting: a case example, in (eds) D Ward, T P Bechet and R Tripp, Human Resource Forecasting and Modelling, The Human Resource Planning Society, New York
Farnham, D (2006) Examiner’s Report (May), CIPD.co.uk Marchington, M and Wilkinson, A (1996) Core Personnel and Development, Institute of Personnel and Development, London
Quinn Mills, D (1983) Planning with people in mind, Harvard Business Review, November–December, pp 97–105
Reilly, P (1999) The Human Resource Planning Audit, Cambridge Strategy Publications, Cambridge
Reilly, P (2003) Guide to Workforce Planning in Local Authorities, Employers’ Organization for Local Government, London.
The writer is a Development Economist and Chartered Financial Analyst. Daniel is the Chief Economist at the Policy Initiative for Economic Development. He is also the Director of Research and Analysis, B&FT. He can be reached on email: daniel.anim-prempeh@thebftonline.com
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