Manpower planning is a very important tool and technique of human resource management. It basically aims at maintaining and improving the ability of an organisation to attain the goals of an organisation by developing and utilising properly its human resources.
1. Importance of Manpower Planning 2. Manpower Estimation3. Preparing Manpower Inventory 4. Process of Manpower Planning
5. Methods 6. Determining Manpower Gaps. 7. Needs 8. Framework 9. Approaches for Developing Manpower Planning 10. Advantages.
What is Manpower Planning: Importance, Process, Methods, Needs, Approaches, Advantages and Other Details
Manpower Planning – Importance in “Manpower Planning Companies”
V. S. Narayanrao explained the practical utility and importance of manpower planning in “Manpower Planning Companies”, accordingly –
(1) At the national level, it is generally done by the government and covers various items like population projections, economic development programmes, educational facilities, occupational distribution and growth, industrial and geographical mobility of human resources.
(2) At the sector level, it can be done by the Central and State Governments covering the manpower needs of various sectors such as industry, agriculture, service sector.
(3) At the industry level, it may cover manpower forecast for specific industries e.g., heavy industries, engineering, consumer goods industries, public utility industries, etc.
(4) At the industrial unit level i.e., micro level, it may cover its manpower needs for its various departments and for different types of personnel.
Thus, Manpower Planning plays an important role at both the micro as well as the macro level. It is found today that more complex technologies are functioning in economic, social, business environments. As a result, the organisations face shortages of the right type of human resources. Manpower planning enables to get the right type of personnel in the organisation.
Manpower Planning – Manpower Estimation and Its Dimensions
It is very essential for the management to estimate the structure of its organisation at a given point of time. For this estimation, the number, type, qualifications, qualities etc., of the employees needed must be determined. In fact, many environmental and other factors affect this determination of manpower.
Important factors amongst them are business forecast, development, expansion and growth of the organisation itself, management philosophy and policy, government policy, design and structural changes, product and human skills mix, competition etc., Manpower estimation is very important in the human resource or manpower planning process
It has made clear that the objectives of an organisation are decided and defined by the top management. The role of human resource department is to sub-serve the overall objectives by ensuring the availability and optimum utilisation of human resources. Therefore, manpower estimation is required to be done properly which involves the estimation of the quantity and quality of right type of people or human force.
It is obvious that the basis of the manpower estimation should be the annual budget and also long-term corporate plan. For this purpose, certain techniques such as managerial judgement, ratio-trend analysis, and Delphi technique can be used.
The main dimensions of HR planning, estimation of manpower are as follows:
(a) Total number of employees presently available and their types, nature of work, wages etc.
(b) A detailed job-description for each position of employee working in different departments.
(c) Age distribution, qualifications, experience etc., of the employees.
(d) Estimation of short, medium and long-term manpower needs.
Manpower estimation can help an organisation to retain the desired employees longer and keep them functioning more efficiently and more productively at a reasonable cost.
Specifically, it can help to achieve the following objectives:
(i) To make available the human resource in adequate quantity and of required quality.
(ii) To reduce recruiting and replacement costs.
(iii) To reduce labour costs associated with attrition.
(iv) To improve employee morale and satisfaction.
(v) To control unnecessary expansion, or rapid expansion or reduction in workforce.
(vi) To monitor staffing and retention policies.
(vii) To focus on training resources properly.
Manpower estimation definitely helps an organisation to manage its human resources in a better way and more effectively with dynamic situations. It should be noted that all organisations, especially those which have a high labour turnover must systematically do their short-terms, medium-term as well as long-term manpower estimation and human resource planning. Further, in order to meet the changing conditions, periodical reviews and adjustments are also necessary.
In order to achieve effective HRP by doing manpower estimation properly, the duties involved and the skills required for performing all the jobs in an organisation, necessary information is required to be collected in respect of various jobs to be performed. Hence, job analysis becomes essential. Job analysis refers, in simple language, to the process of collecting information about a job. The job analysis process results in two sets of data i.e., (a) Job description, and (b) Job specification which is then used to carry out job evaluation.
Manpower Planning – Preparing Manpower Inventory (With Steps)
“Manpower Inventory involves the classification of characteristics of personnel in an organisation, in addition to counting their number.”
The term ‘inventory’ is often used in relation to counting of tangible objects like raw materials, goods in progress, or finished products, etc. In manpower inventory, the items are intangible.
It involves cataloguing the characteristics of personnel in the organisation, besides counting their number. Both present and future characteristics of personnel are recorded in the manpower inventory.
It involves the following steps:
1. The first step in manpower inventory is to decide who should form a part of it. Generally, inventory is prepared for persons working on important posts—the executives and some persons from the operative staff are covered in it. From operative staff only those persons are included in inventory who have the potential of taking up higher responsibility posts.
2. After determining the persons to be included in manpower inventory, the second step is to collect information about them. Some information may be collected from records while some may be collected through interview or talks with the concerned persons.
The factual information such as age, experience, education, health, appraisal reports, attitude, etc. will be noted from the records. The brief interviews with persons will help in understanding his caliber, attitude, aspirations, motives, etc.
A summary statement of information is prepared about each person and is kept ready for consultation. The information will help management to find out the suitable persons in the organisation for taking up senior positions in future. This will also enable management to determine whether persons from outside will be required in future or not.
3. The next step in manpower inventory is to appraise the talent catalogue. The present and future capabilities of persons are assessed. Some scale is prepared for appraising the persons.
Besides appraisal tests, remarks about persons are also given. The remarks may relate to their talent, decision-taking ability, training required, specific limitations, etc. Besides appraisal tests, specific remarks are useful in picking up persons for future positions.
The manpower inventory will enable manager to know the present and future potentialities of all individuals and their suitability for various jobs.
Manpower Planning – 9 Main Strategic Processes for Manpower Planning
Manpower planning is described as a process. It is a continuous process in the sense that the work of estimating demand for and supply of employees is required to be carried on as long as the organisation carries on its business. The process of manpower planning is one of the most important, crucial, complex and continuing managerial functions.
It entails consideration of several steps with relevant input before the estimation of manpower requirements can be arrived at and also involves, the identification of the source of supply to meet the requirements, taking into consideration various constraints.
Manpower planning process seeks to ensure that the people with right fit in the required number are placed at the right time in the organisation.
From this point of view, G. Stainer suggested nine strategies for manpower planning which are stated as follows:
(a) Collection, maintenance and interpretation of relevant information regarding human resources.
(b) Periodical review of manpower objectives and requirements.
(c) Development of procedures and techniques to determine the requirements of different types of manpower over a period of time.
(d) Development of measures for the utilisation of manpower along with independent validation, if possible.
(e) Employment of suitable techniques for the effective allocation of work with a view to improve manpower utilisation properly.
(f) Conducting surveys for determining the factors hampering the contribution of individual as well as of the groups in the organisation for modifying or removing those handicaps.
(g) Development and employment of methods of economic assessment of human resources, reflecting its features as an income generator and cost.
(h) Evaluation of the procurement, promotion, retention, etc., of the effective manpower resources in relation to the forecast of manpower requirements of the organisation.
(i) Analysis and controlling of organisational processes and structure for encouraging maximum individual and group performance without incurring excessive costs.
These strategies also throw light on the objectives of manpower planning and we can get an idea from these points about the steps involved in the manpower planning.
The process of manpower planning begins with the determination and review of the objectives of organisation. This enables the management to estimate the manpower requirements and internal supply of human resources. W, S. Wickstorm suggested that the manpower planning consists of a series of activities such as –
(1) Forecasting of future manpower requirements.
(2) Making an inventory of present manpower resources and also assessing the extent to which these manpower resources are employed optimally.
(3) Anticipation of manpower problems by projecting the present resources into the future and making comparison with the estimation of human requirements in order to determine their adequacy, both qualitatively and quantitatively.
(4) Planning for the programmes of selection, training, development, utilisation, promotions, etc., in order to ensure adequate manpower supply in the future.
Prof. R. S. Davar suggested the following important steps involved in the process of manpower planning:
a. Anticipation of manpower requirements for the organisation.
b. Proper planning of job requirements and descriptions.
c. Analysis of skills required in order to determine the nature of manpower needed.
d. Selection of adequate and suitable sources of recruitment.
Dr. P. Subba Rao pointed out following eight steps of process of human resource planning:
(a) Analysis of organisational plans.
(b) Demand forecasting – Forecasting of overall human resource requirements in accordance with the organisational plans.
(c) Supply forecasting – Obtaining the data and information about the present inventory of human resources and forecasting of the future changes in the human resource inventory.
(d) Estimation of net human resources or manpower requirements.
(e) In case of future surplus, plan for redeployment, retrenchment and lay-off.
(f) In case of future deficit, forecasting of the future supply of human resources from all sources with reference to plans of other companies.
(g) Plan for recruitment, development and internal mobility if future supply is more than or equal to net human resource requirements.
(h) Plan to modify or adjust the organisational plan if the future supply is expected to be inadequate with reference to future net requirements.
Prof. P. Subba Rao further makes it clear that all the steps of manpower planning are interdependent and sometimes, certain steps can be processed simultaneously. For example, steps ‘a’ and ‘h’ mentioned above can be undertaken simultaneously.
The persons who perform manpower planning work have to decide the period for which the plan should be prepared.
Manpower planning can be done for:
(1) Short term such as one year or so.
(2) A medium term which is for more than one year but upto five years.
(3) For a long term which is for a period of more than five years, ten years or upto fifteen years.
It is regarded that manpower planning for a very long period of time does not serve much purpose. Manpower planning is generally done for a period of five to seven years with a break-up given for each year.
While doing the manpower planning the following important steps are expected to be completed:
Objectives of the organisation act as a guideline for estimating the demand for manpower in the future. The objectives should be stated in clear terms so that the work expected to be done for achieving the objectives can become clear to the people involved in man-power planning. Hence, the process of manpower planning should start with analysing the organisational plans into production plan, technological plan, expansion and diversification plan, marketing and sales plan, etc., and further, each plan should be analysed into sub-units as per requirements.
Analysis of organisational plans helps in estimating the demand for manpower as it gives the idea about the quantum of future work activities. It is to be done to relate future manpower needs to the future organisational needs so as to maximise the future returns on investment in manpower or human resources.
If the objectives are stated in terms of market share to be obtained or the type of product to be manufactured and the volume in which it is to be manufactured, it becomes possible for the planners to estimate the manpower which will have to be employed in various departments and sections to complete the expected production. Objectives decided in terms of expansion, modernisation and diversification programmes also enable the planners in preparing a proper manpower plan.
If the organisation is small, manpower planning can be done to cover the entire unit. But, if it is large, manpower planning is done for separate departments or units or by class of employees at each level or at a cluster of levels.
The concept of ‘Forecasting future human resource needs’ implies estimating the manpower requirements or estimating the need and demand for manpower for the fixed period for which the manpower planning activity is undertaken.
When manpower planning is done, the person in charge has to find out the requirements of human resources in order to undertake various activities. The human requirements forecast must be both in terms of quantity as well as quality. While doing so, forecasting supply of manpower is also required to be considered to adjust demand of human resources with its supply.
While forecasting or estimating manpower requirements, the existing job design and analysis is required to be reviewed thoroughly keeping in mind the future required capabilities, knowledge, skills, etc., of the present employees. If required, various jobs are redesigned considering the organisational and unit-wise plans and programmes, quantum of future work, activities, tasks, etc.
After analysis and estimation of the objectives of the organisation, in the light of expected changes in the process of production, job designs, etc., the requirements of human resources for the existing departments of the organisation as well as for new vacancies are found out.
The demand for the employees depends upon the objectives of the organisation. It becomes necessary to estimate the future demand for the product or products which the organisation is manufacturing. The demand for the product itself is affected by many factors such as the degree of competition faced by the organisation, likes and dislikes of the customers, state of the economy, policies of the Government in respect of imports and exports, etc.
Once the demand for the product of the organisation is decided, in the light of it, the number of employees needed for manufacturing the required quantity is calculated. Need for employees are also required to be decided by considering the type of technology which the organisation intends to use in its work. Technology changes at a very rapid rate and, therefore, it becomes difficult to know what will be its effect on the number of employees which the organisation will need.
Along with the external factors, internal factors like budget constraints, level of production, policies of management regarding new products to be introduced, labour intensive or capital intensive methods of production to be adopted, future organisational structure planned by the management also affects the demand for the manpower and due consideration of these factors also becomes necessary on the part of persons doing demand forecasting for the manpower.
After completing the second step of demand forecasting, planners doing manpower planning have to forecast the supply of manpower. The first step in supply forecasting is to consider the present manpower available with the organisation. For this purpose manpower inventory is prepared.
(i) Manpower Inventory:
Manpower inventory is the data collected about the present employees of the organisation. Information about all the employees is collected with reference to the department in which the employee is working, his status or position, age, sex, qualifications, experience, training programmes completed, pay-scale, skills possessed, abilities and capabilities, etc., This information is classified in a proper way to enable the planners to understand how many employees are available with the organisation at present.
(ii) Manpower Audit:
Manpower audit is carried out to find out how the present employees are utilised. The manpower audit points out the information about the performance of the employees and whether the skills and abilities of the present employees are fully utilised or not. It also enables the planners to identify the employees who can be developed for undertaking more responsible jobs in the future. Information about absenteeism of the employees, productivity of the employees also becomes available through manpower audit and this information can be used by the management for improving the performance of the employees.
The total number of employees needed as calculated by demand forecast is compared with the total supply of manpower expected to be available in the plan period. Such a comparison may show that there is shortage of manpower or there is excess manpower available with the organisation. The persons doing manpower planning would find out what is the position of manpower in the organisation so that accordingly, necessary plans can be prepared for meeting that situation.
On the basis of the information available from the 4th step mentioned above, the planners have to prepare a plan and a programme. If there is shortage of manpower, plans are prepared for recruitment and selection of the new employees. For this, the sources of recruitment are decided and information available about prospective employees is obtained. Depending upon the type of person to be selected, an adequate selection programme is prepared and implemented.
If instead of shortage of manpower it is found that there is excess manpower available, arrangement is made to redeploy the surplus employees by providing training to them so, that they can perform the new jobs satisfactorily or schemes like ‘golden handshake’ are prepared and the equilibrium between the demand for and supply of manpower is achieved.
Plans are also prepared for full utilisation of the human resource available. Transfer of employees, training of employees and career development plans for the employees are prepared with the objective of making proper and full use of the abilities of the employees and also to help employees get job-satisfaction, one of leading factors of retention.
The plans prepared for obtaining additional employees or for reducing the excess number of employees is implemented. The effectiveness of the entire manpower planning is evaluated by finding out whether manpower planning has enabled the organisation to achieve the objectives as per expectations. In case the objectives are not satisfactorily realised, manpower plans may be required to be modified or the organisational objectives may be altered.
Thus, in the human resource planning process, there is forecast of personnel needs i.e., employees needed, assessment of the supply factors through various personnel-related programmes. Of course, the HRP process is definitely influenced by the overall organisational goals and objectives as well as the environment of business.
The process of manpower planning works in a stepwise manner.
The steps for the same are listed below:
1. Need identification – Each department has to identify its targets and get resources allocated accordingly.
2. Succession plan – Then, a succession plan must be formulated by the personnel managers of each department ensuring that they incorporate additional training programs in order to alleviate the labor turnover rate of the company.
3. Planning – Planning is done for recruiting candidates if there is shortage of staff in the organization.
4. Redundancy plan – A redundancy plan must also be developed in case the organization feels that there are employees in a company that are not required.
5. Approval – These plans and proposals made by the personnel managers are then sent to the higher management team for approval. If these are approved, then each department seeks to implement them and depending on the needs of individual departments and cost constraints, these plans are evaluated and managed.
Manpower Planning – 4 Main Methods and Techniques Used to Determine the Requirements of Personnel
The four methods generally used to determine the requirements of personnel are:
(i) Annual estimate of vacancies;
(ii) Long-range estimates of vacancies;
(iii) Fixed minimum man specification requirements; and
(iv) Specific position estimations.
Annually the top management team and the directors must examine their organisation structure and its adequacy for the assigned functions as well as its adaptability for change anticipated in the near future. This analysis or audit includes a review of the current vacancies and probable future changes in the organisations personnel.
For example, adequate forecasts of organisational changes can indicate the number of executive positions which will have to be filled as well as the duties and responsibilities for such positions. From this can be ascertained the nature of training and development required for the existing staff to fit these positions adequately.
A crystallisation of the future job requirements can help selection of persons who should participate in the management development programme. In this way, manpower planning is helpful in both the selection and developmental activities.
Techniques of Manpower Planning:
1. Time Series Analysis
2. Regression Analysis
1. Time Series Analysis:
It is based on work load and manpower utilization. The four elements considered in a time-series are trend (Tt), cyclical effect (Ct), Seasonal effect (St) and random effect (Rt).
They are multiplicative –
Vt = Tt x Ct x St x Rt
The projections are done by either moving averages method or exponential smoothing method.
(i) Simple Linear Regression:
The method that is used is called the least-squares method. The line of best fit is obtained through a scatter diagram in which the sum of the squared vertical deviations from the fitted line is minimised.
The error value tells us whether the model is appropriate for a given set of data or not.
Standard Error of Estimate:
The examination of the ‘e’ gives an estimate of the reliability of the regression model.
For this purpose, the square of the error e, i.e., e2 known as the variance is taken as the basic measure of reliability. Clearly, the larger the variance, the less reliable is the regression in predicting our sample data.
The variance can be calculated by
Where n is the number of observations. The smaller x and y values are the values of X and Y measured from their respective means, X̅, and Y̅. Thus, x = X – X̅, and y = Y – Y̅.
It is true that the standard error of estimate tells us a great deal about the reliability of the regression used but alone it is not sufficient to invalidate the regression equation. It becomes meaningful when the planner simultaneously sees how well the regression line fits the sample data.
The measure used is called the Coefficient of determination and is given by:
Where 0 < r < 1 … (9)
It should be noted that the higher the value of ‘r’ the better is the fit.
(ii) Multiple Regression Model:
Multiple regression analysis becomes a useful technique when say the company has two or more products and an estimation of manpower is required to be done.
In this case suppose ‘Y’ denotes the manpower and X1, and X2 the outputs for the two types of products. Then if the sample size is ‘n’ the multiple regression equation (prediction equation) is given by-
y = a + b1X1 + b2X2
The values of a, and b2 are chosen so as to minimise (Y – Y’)2 difference between the actual and estimated ‘Y’ values.
The value of ‘a’ is given by formula
From the fitted regressions, the predicted value Y of manpower can be estimated for each type of product (X1 and X2 in this case).
A check on the linearity of the regression is made by plotting two scatter diagrams Y Vs. X1 and Y Vs. X2.
Approaches to HR Demand Forecasting:
There are two approaches to HR demand forecasting- quantitative and qualitative. When concentrating on human resources needs, forecasting is primarily quantitative in nature and, in large organisations, is accomplished by highly trained specialists.
Quantitative approaches to forecasting can employ sophisticated analytical models, although forecasting may be as informal as having one person who knows the organisation anticipate future HR requirements. Organisational demands will ultimately determine which technique is used. Regardless of the method, however, forecasting should not be neglected, even in relatively small organisations.
1. Quantitative Approaches:
Quantitative approaches to forecasting involve the use of statistical or mathematical techniques; they are the approaches used by theoreticians and professional planners. One example is trend analysis, which forecasts employment requirements on the basis of some organisational index and is one of the most commonly used approaches for projecting HR demand.
Following several steps typically does trend analysis – First, select an appropriate business factor. This should be the best available predictor of human resources needs. Frequently, sales or value added is used as a predictor in trend analysis. Second, plot a historical trend of the business factor in relation to number of employees. The ratio of employees to the business factor will provide a labour productivity ratio.
Third, compare the productivity ratio for at least the past five years. Fourth, calculate human resources demand by dividing the business factor by the productivity ratio. Finally, project human resources demand out to the target year.
2. Qualitative Approaches:
In contrast to quantitative approaches, qualitative approaches to forecasting are less statistical, attempting to reconcile the interests, abilities, and aspirations of individual employees with the current and future staffing needs of an organisation. In both large and small organisations, HR planners may rely on experts who assist in preparing forecasts to anticipate staffing requirements. For example, expert forecasts – In this method, managers estimate future human resource requirements, their experiences and judgments to good effect.
Management forecasts are the opinions (judgments) of supervisors, department managers, experts, or others knowledgeable about the organisation’s future employment needs. For example, at the Ripe Tomato, a growing family dining chain, each restaurant manager is responsible for employment forecasts.
Another qualitative forecasting method, the Delphi technique, attempts to decrease the subjectivity of forecasts by involving a group of preselected individual and soliciting and summarising the judgments. Thus a group decision-making process is invoked which in turn, requires a great deal of process orientation to enhance coordination and cooperation for satisfactory forecasts.
This method works best in situation where dynamic technological changes affect staffing levels. Ideally, HRP should include the use of both quantitative and qualitative approaches. In combination, the two approaches serve to complement each other, thus providing a more complete forecast by bringing together the contributions of both theoreticians and practitioners.
Whatever technique one might utilise, they need to be done systematically.
HR planners many times go further and analyse the demand on the basis of the following:
i. Workforce analysis to determine the rate of influx and outflow of employee – It is through this analysis one can calculate the labour turnover rate, absenteeism rate, etc. Qualitative methods go a long way in analysing the internal flow created by promotions, transfers etc.
ii. Workload analysis, with which one can calculate the numbers of persons required for various jobs with reference to a planned output – This takes into consideration factors such as absenteeism, and idle time, etc. Both quantitative and qualitative techniques are utilised for accurate results.
iii. Job analysis – Job analysis helps in finding out the abilities or skills required to do the jobs efficiently. A detailed study of jobs is usually made to identify the qualifications and experience required for them. Job analysis includes two things – job description and job specification. Job description, thus, is a factual statement of the duties and responsibilities of a specific job. It gives an indication of what is to be done, how it is to be done and why it is to be done. Job specification provides information on the human attributes in terms of education, skills, aptitudes and experience necessary to perform a job effectively.
This you will learn more in the coming lessons. Hope our above discussion on demand / need forecasting is clear to you all. If yes, then let’s discuss the second most important element in HRP process-supply forecasting and analysis.
After determining manpower needs of a company, the manpower planner should think about the supply of manpower to fulfil the needs. There are two types of sources for manpower supply, viz., internal source and external sources. Let us see each in detail-
Manpower Supply from Internal Sources:
The manpower supply from internal sources depends on two factors.
1. The extent to which the present employees survive in the organisation; and
2. The rate of internal turnover (i.e., transfer and promotions) of personnel in the organisation.
(1) Analysis of Retention:
Before studying this method, we should have a dear understanding of the terms ‘Wastage’ and ‘Labour turnover’.
When the employees leave the organisation, it is wastage. A method to measure this wastage is labour turnover rate. The following formula is generally used to calculate the labour turnover rate.
The results obtained by this method are not much helpful for guiding manpower planning. However, the method is useful for comparison between different companies. The calculations by this method do not show how many workers were stable on their positions during the year.
Let us take a hypothetical example. There are two firms A and B. There are 100 positions in both the firms. In firm A, all the 100 employees leave the organisation and new 100 employees are recruited. In firm B, 90 employees remain stable in the organisation. But the remaining 10 positions were left by employees for 10 times in the year.
Thus, the number of leavers during the year in both the firms. The average number of employees during the year in both the firms is also 100. Therefore, labour turnover rate for both the firms would be 100 per cent. The similarity in the labour turnover rate may misguide us to believe that working conditions in both firms are similar. There are different problems in both the firms, demanding different types of solutions.
The better method to determine labour turnover is “Stability Index”.
(2) Stability Index:
Stability index is useful in finding the proportion of the employees maintained in the organisation during the year. The formula to calculate stability index is as follows-
Stability index is used along with labour turnover rate. The main limitation of stability index is that it does not take into account the period of service of the employees who left the firm.
(3) Cohort Analysis:
The third method to measure the stability of employees is known as “Cohort Analysis”. Cohort means, “A homogeneous group of employees who joined the organisation during a fixed period of time”. Cohort analysis involves the drawing of the graphs based on leaving pattern of the Cohort group. On the basis of these graphs, wastage rate or stability rate can be determined.
The main disadvantage of the Cohort analysis is that if we are dealing with a relatively stable group (i.e., one with a very low wastage rate), the behaviour of the group would have to be followed over a longer period of time to enable the management to have a meaningful analysis.
The Cohort analysis would be useful, however, if relatively unstable groups, such as apprentices, are to be observed.
(4) Census Method:
In Cohort analysis, the stability or instability of a homogeneous group is observed; while in Census method, a section is selected from the whole labour force and its behaviour is examined for a short period, usually a year. The histograms are drawn to show the length of services of those persons who have led the organisation, i.e., leavers.
The main advantage of Census method is that we can know about all the employees instead of a particular group. Moreover, every individual in the selected group contributes to the wastage pattern which can be quickly calculated and put to use for testing and forecasting.
Until now we have considered only the external movement of labour. We would now think about internal movement of labour caused by promotion, transfers, etc.
Manpower Planning – Determining Manpower Gaps
The final stage is to balance out the demand and supply gap. The closer the gap the better it is for the company when it actually goes into procuring.
A comparison chart can be developed to find what is available and to what extent it can fulfil the demand forecast. This exercise helps us have an idea of the quantitative and qualitative gaps in the workforce. A reconciliation of demand and supply forecasts will give us the number of people to be recruited or made redundant as the case may be. This forms the basis for preparing the manpower plan.
In this process a company always needs to keep repeating this step as it operates in a changing environment. Changes in product mix, union agreements, and competitive action are some of the important things that need special attention.
The human resource requirements thus identified are translated into a concrete manpower plan, backed up by detailed policies, and other human resources instruments and strategies (for example, recruitment, selection, training, promotion, retirement, replacement, etc.).
The manpower plan is further divided into the following resultant operational plans:
1. Recruitment plan to show how many and what type of people is required and when they are needed;
2. Redeployment plan to help chart out the future movement in terms of training and transfers.
3. Redundancy plan will indicate who is redundant, when and where; the plans for retraining, where this is possible; and plans for golden handshake, retrenchment, lay-off, etc.
4. Training plan to chart out if a training is required. If yes, when and to which level; whether it will be done in-house, done in phases or included as part of a formal induction programme. This includes the cost and benefit analysis of all the options available.
5. Productivity plan will indicate reasons for employee productivity or reducing employees costs through work simplification studies, mechanisation, productivity bargaining, incentives and profit sharing schemes, job redesign, etc.
6. Retention plan will indicate reasons for employee turnover and show strategies to avoid wastage through compensation policies, changes in work requirements and improvement in working conditions.
7. Check / reviews points. The success of the entire exercise is dependent upon frequent reviews so that none of the factors are left out and changes are constantly taken care of. The important thing is to clearly demarcate point for periodical checks to incorporate deficiencies and periodic updating of manpower inventory based on training and performance reviews, in the light of changing circumstances.
Manpower Planning – Need for Strategic Manpower Planning
The ability to predict manpower needs is crucial for an industry. On the demand side, companies formulate manpower planning strategies based on these forecasts, while, on the supply side, they provide job seekers with a basis to assess the attractiveness of a given sector.
Manpower forecasts are also important for assisting the government in the policy-making process by serving as pointers to help avoid redundant investments and achieve efficient and balanced growth for an industry. Meanwhile, forecasts based on an inaccurate market analysis can cause imbalances such as – undersupply or over supply of manpower.
Forecasting errors most often stem from a superficial and partial analysis of a market, which overlook its structural characteristics, or one that is narrowly focused on the present, or a given industry, without taking into consideration dynamic changes that may occur over time or delayed feedback effects, or linkages the market may have with other related industries.
Static and unilateral analysis, in sum, is the most common culprit for erroneous predictions of supply and demand for manpower. These approaches can yield particularly severely flawed forecasts with cutting-edge industries and emerging industries which, while entertaining complex relationships of interdependence with other industries and experiencing rapidly-growing manpower demand, are characterised by a longer period required developing needed human resources.
Manpower Planning – Framework
The models of manpower planning deal on a high level of abstraction with employee movements from function to function through the organization. As a consequence functions and employees are seen as numbers with no characteristics.
Within the organization the requirements of functions develop over time. As a result employees are needed with different competencies. To decrease the level of abstraction we must avoid the pitfall of implementing too much behavior of employees. It is not possible to model the many interactions and career patterns of employees and the occupation of function in a very detailed manner.
The modeling of “soft” factors such as preference, or dislike of specific functions by employees is therefore, saved for later research. Our approach is to first cover the “hard” factors of employee characteristics and function requirements, for example education, age, and experience based on earlier fulfilled functions. To model, verify, and explain these interactions patterns which will occur over time is the first aim.
The objective of manpower forecasting is to give insight into the (mis)match between the competencies of the employees and the demand for competencies of the organization. The starting point has to be the demand of the organization, in terms of needed competencies, and based on the organizational goals.
Therefore, the following information is needed of the organization with respect to competencies:
i. First, a characterization of the organizational infrastructure, which functions are available within the organization that is necessary to carry out the activities of the organization.
ii. Secondly, the organization must provide a characterisation of required competencies for carrying out a function. Together with the number of employees needed in the functions it defines the demand for competencies in the organization.
iii. To model the flow of employees through the organisation, conditions for promotion such as a minimum time served in a function have to be determined.
iv. Education is important to develop the skills of the employees within an internal labour market.
v. The supply side for manpower forecasting consists of the set of competencies of the employees. Their competencies can change (and usually increase) continuously. The increase can have different causes.
The competencies of the employees, which are useful for the organization, can also decrease by several causes. In the first place, after reorganization a shift in the competency demand of the organization arises. The number of employees stays the same, but the amount of competencies of the employees, which are still valid for the organization can decrease.
As these competencies are no longer necessary for the organization, they are not taken into account anymore. Secondly, the employee’s competencies get out of date after some time. Fighting obsolescence is a joint responsibility of the employee and the organization. Solutions can be to take courses or to change position in the organization to gain new experience.
The factors mentioned here do not change the quantity of the employees, but just the set of available competencies. Besides the mentioned processes, three other factors have an influence on the available competencies in an organization – inflow, outflow, and absence. The inflow of employees creates a growth in competencies available for the organization.
The other two factors decrease the competencies. Insight into the trends of absence (through illness, vacation, and other causes), inflow and outflow can be gained by analysing historical data and by looking at the developments on the labour market.
These three factors change the obtainable competencies in the organization by changing the quantity of employees within the organization. Of course there is a difference between inflow in the ‘lowest’ functions in the organization and horizontal inflow in higher functions.
In the latter case, one can expect the new employees to have a larger set of suitable competencies for the organization. In organizations with an internal labour market, employees usually only enter the organization at the bottom in a fixed set of functions. The inflow can be controlled by the organization, but it of course depends on the status of the labour market for the needed competencies. Outflow and absence can only be influenced indirectly.
However, at macro level, the competencies, whether in regard to existing or new employees, are governed by Peter Principle which articulates – “In time, every post tends to be occupied by an employee who is incompetent to carry out his duties” and adds that “work is accomplished by those employees who have not yet reached their level of incompetence”.
Manpower Planning – Top 9 Approaches for Developing Manpower Planning
Planning involves steps to replace any employees who are either promoted or who leave the firm. An example is management succession planning which seeks to ensure that there is at least one qualified manager to replace any higher level manager in the organization.
This is on the basis of firm’s beliefs with regard to forecasting human resource needs. For example one firm believes that a ratio of one production supervisor for every 12 workmen in optimal. This firm maintains this 1:12 ratio because it has proved successful in the past. Another thumb rule is based on past experience that one person can produce 2000 units of output per day and accordingly 5 employees needed for 10,000 units as a matter of forecast.
Markov chains is a powerful analysis technique which, used in manpower planning, can help it successfully achieve its goal. Markov chains make it possible to predict the size of manpower per category as well as transitions occurring within a given time period in the future (resignation, dismissal, retirement, death, etc.). More importantly yet, with a Markov chain, one can obtain long-term average probabilities or equilibrium probabilities.
However, to predict manpower supply and demand with accuracy using a macroeconomic model, one needs a vast array of data for each of the many variables used. To collect these data, one must first get hold of sufficiently broad-ranging time series data for each industry. For this reason, a method of this type proves to be inadaptable for emerging sectors undergoing fast-paced growth with only small amounts of statistical data on the industry as a whole and manpower available.
This refers to the estimate of supervisors and managers with regard to forecasting Human resource needs for the next year unit wise – this approach is called “Bottom up approach” for forecasting as the selections are made by lower level management and added together at a higher level of the organization.
The basic principle here is to say if it takes six people, for example, to perform an existing amount of work, it will take twelve people to do twice as much. Organizations measure activity levels in a variety of different ways. The ratio between ‘direct’ and ‘indirect’ in manufacturing is a classic one.
Individual departments in an organization will also have their own rule-of thumb measures. A sales department, for instance, may have an idea of the number of customer calls a salesperson should make in a week, and, indeed, use this as one criterion for monitoring sales efficiency. If the business plan projects an increase in the number of new customers, this can be translated into a proportionate increase in the sales force.
This method relies on expert opinion in making long range forecasts – this involves obtaining independent judgments from a panel of experts usually through a questionnaire or interview schedule on certain issue affecting the nature and magnitude of demand for an organization’s products and services.
This is one of the most sophisticated methods of forecasting human resource needs – A computer is a mathematical representation of major organizational processes, policies and human resource movement through organization – computer simulations are useful in forecasting for human resources by pinpointing any combination of organizational and environmental variables.
Here the Industrial Engineer observes records and movement of workman and productivity vis-a-vis time required to conduct specific activities.
This method is well accepted in automobile industries where lots of manual activities are involved. It is based on the walking and moving of the workmen to conduct the specific activity.
MOST in an acronym for Maynard Operation Sequence Technique. It was developed at H.B. Maynard and Co. Inc., USA in 1970’s. It is a revolutionary PMTS System. MOST is an activity based work measurement system that enables us to calculate the length of time required to perform a task i.e., a system to measure work. This technique is based on fundamental statistical principles and basic work measurement data complied over many years. MOST concentrates on movement of objects.
It was noticed that the movement of objects follow certain consistently repeating patterns, such as reach, grasp, move and position of object. These patterns were identified and arranged as a sequence events followed in moving an object. This concept provides the basis for the MOST Sequence models.
Manpower Planning – 7 Main Points that Throw Light on the Advantages of Manpower Planning
Besides this, following points also throw light on the advantages and manpower planning:
(1) Manpower planning involves forecasting of manpower requirements in an organisation and helps the management in anticipating personnel shortages and surpluses and also to develop the ways to avoid or correct problems before they become serious. Further, forecasting of long-range manpower requirements is helpful in forecasting the compensation costs involved in that connection.
(2) A proper and systematic forecasting of human resource requirements helps an organisation to determine proper sources and methods of recruitment. Further, an organisation can also adopt a proper selection procedure depending upon the needs of the jobs. Proper tests can be designed for the purpose of selecting the right candidates for the right jobs. Thus, importance of manpower planning is immense in recruiting and selecting of the personnel.
(3) From the view point of training and development, the importance of manpower planning is definitely great. Manpower planning ensures training of employees in an organisation. Training involves imparting of knowledge and developing attitudes, skills, social behaviour, etc., of the employees.
Manpower planning identifies the training needs of the personnel of an organisation beforehand so that necessary arrangements and training programmes can be chalked out accordingly to give training to the employees.
Training helps the organisation to utilise its human resources to the optimum. Manpower planning is not only important from the view point of an organisation but it also helps the employees of an organisation in developing and in the application of skills, abilities, knowledge which affect their capacity positively as for as efficiency, earnings, etc., are concerned.
(4) So far as performance appraisal is concerned, manpower planning plays an important role in that area too. Performance appraisal refers to identification of strengths and weaknesses of the employees of an organisation relating to their jobs. It is conducted to know whether the existing human resources possess the necessary qualities and qualifications as per the requirements of the jobs.
Manpower planning makes available necessary strategies to correct the weaknesses of the employees by making the proper arrangements for corrective training, retraining, and orientation programmes. As a matter of fact, all these are interrelated activities.
(5) Importance of manpower planning is none-the-less in respect of controlling the labour costs. Efforts are made in manpower planning to assure the timely and sufficient supply of labour, thus, avoiding the shortages and surpluses of labour which leads to save and control labour costs.
(6) Manpower planning facilitates career development of employees. Career development refers to upward movement of the personnel employed in an organisation. Taking into consideration the long range plans of the organisation, a career path of an employee can be projected along with what is expected from him in terms of competence levels. The employees can then plan their career accordingly within the organisation. The clarity plays a significant role in enhancing the levels of motivation of employees – a very important role of Manpower Planning.
(7) Manpower planning if done properly and systematically, problems of low productivity, absenteeism, inter-departmental conflicts, resistance to change, etc., can be tackled and solved efficiently. The effort leads to higher productivity and efficiency levels, thus stressing on the importance of this major function under HR organisation.
Thus, it can be said that manpower planning definitely helps to increase the prospects of an organisation in managing its resources in a better way and coping more effectively with dynamic situations.