HR Planning & Recruitment Flashcards
Outsourcing:
A situation where a client company recruits an outside company to provide a service the client company would normally provide itself.
IBM taking over computer department in a client company.
Offshoring:
When a company lets a firm somewhere far away provide it with manufacturing services or knowledge based services.
Apple headquartered in CA, but offshores manufacturing in China.
Goals:
- lower the costs of labor
- lower the costs of production & distribution
Reshoring:
The practice of bringing elements of production back to the country of origin.
Nearshoring:
Sort of like reshoring, a company in the US may find that the timezone changes in dealing with a company in India etc, can be so daunting, or cultural and language differences are a problem, so companies are thinking of nearshoring. Bringing the work to lower cost countries but nearer to the client zoned base. IE, mexico & south america.
BPO & KPO:
BPO: business process outsourcing. customer service phone line in India etc.
KPO: knowledge process outsourcing. Accounting & tax return prepping, planning etc.
Boston Consulting Group video.
Why is HR planning so important?
Talent management.
Leadership development.
Employee engagement.
Strategic workforce planning.
Now and into the future, people are firms most scarce resources. Recruiting & retaining employees is more difficult than buying technology. Firms in the developed world are having labor shortages for leadership/high skill jobs. Over supply in developing world.
Creating people advantage.
How is HR planning tied to strategic management?
HR planning –> strategic management –> people advantage –> competitive advantage.
HR needs to become more analytical and strategic. HR will be where you define your competitive advantage via people advantage.
HR planning should be a strategic function. HR planning that is more strategic than operational is longer-range, it is more flexible than fixed, and it requires resource commitments. It should flow directly from a firm’s business strategy and its broader HR strategy. In fact, you might recall from our discussion on strategic management and HR strategy that HR planning is in fact part of the strategic management process.
Forecasting labor demand is part of a firm’s external analysis, which is part of a larger SWOT analysis that is necessary for strategic planning. The strategic planning process in general determines a firm’s talent-related needs, which then influence the implementation of a firm’s strategic plan vis a vis HR policies and practices. So HR planning really is a strategic function, assuming it is done as part of a larger strategic management function. HR managers are often responsible for HR planning, but in many organizations, especially those that are decentralized, line managers are responsible as well. To avoid the process being too fixed, it may be important that HR planning be democratic, involving input and responsibility from HR and line managers. That said, in small firms, line managers are often responsible for HR planning themselves.
HR Planning - professors definition, powerpoint slide
Also known as workforce planning or strategic workforce planning, can be thought of as processes and practices used to ensure that individuals with the KSAOs are in place at the right time to meet an organization’s current and future labor force needs.
In other words, HR planning helps firms to develop plans and strategies for addressing labor supply and demand, as well as avoiding and mitigating labor shortages and surpluses.
HR planning can include a variety of dimensions including:
- talent inventories
- workforce forecasts
- action plans
- program evaluations
We need HR planning for organizations to be effective and efficient, to follow EEO requirements and also to support the KSAs of employees as well as the work that employees and their managers are doing on a day-to-day basis. HR planning is important in terms of making sure operating budgets are adhered to, and will directly affect a company’s effectiveness.
3 Stages in HR Planning Process:
- Forecasting: forecasting labor supply and demand for various positions. The main purpose in this stage of the planning process is to make useful predictions about where there will be future labor surpluses and shortages so as to be able to avoid them or to develop plans for remedying them.
- Goal Setting & Strategic Planning: Once forecasts have been made, the second step in the HR planning process is to set specific, quantitative goals for increasing or decreasing human resource units (i.e., people) in different positions across a specified period of time.
- Program implementation & evaluation: This is the last step in the HR planning process. There are a variety of competitive pressures that can impact HR planning, and these need to be considered vis a vis a firm’s business and HR strategies as well as the HR planning process. These can include, for instance, expansion into new markets, mergers & acquisitions, industry trends and economic factors, as well as actions of competitors.
Forecasting Stage of HR Planning - Determining Labor DEMAND
Predictions about labor demand are usually done around specific jobs or skill categories. As you may recall from the unit on work design, work can be thought of and organized around either jobs or skills. Recent research – the Differentiated Workforce - suggests that firms should focus on those jobs or skillsets that are key to the organization’s success. The information that needs to be gathered and analyzed is used to predict whether demand will increase or decrease for a particular position in the future. With forecasting, organizations will typically use multiple methods to forecast – including both statistical and judgmental methods. In terms of determining labor demand, firms (usually larger, more sophisticated firms) will use sophisticated statistical models to predict labor demand. Leading indicators are essentially variables that explain a significant portion of variance in labor demand. In other words, they are objective measures that predict changes in demand. Leading indicators, like any variable in a statistical analysis, are not perfectly reliable. Moreover, there are sometimes events for which there isn’t a very good precedent and thus there really isn’t a very good leading indicator to try to predict what will happen in the future with. As such, pooled judgment of experts (e.g., HR practitioners and managers) will be used to try to predict labor demand.
Predicting labor demand, statistical method vs judgmental method: statistical – leading indicators to forecast labor demand. Leading indicators may not be perfect, economy and labor change etc, so statistical methods aren’t always perfect so you complement them with judgmental methods, ie experience and knowledge of HR managers. Leading indicator is a variable that is highly predictive, highly correlated with labor demand.
Forecasting Stage of HR Planning - Determining Labor SUPPLY
Once a firm has determined the demand for labor, it then needs to determine the supply of labor for various, perhaps key, positions. Since labor supply is mostly from within a firm, at least for existing positions, the analysis is one of internal labor supply, which can be generated through statistical or judgmental methods, just as with determining labor demand. Predictions will need to take into consideration various staffing and HR metrics, such as retirements, promotions, transfers, turnover and terminations. One useful type of statistical (well, at least data-driven) method is the Transitional Matrix. These show the proportion of employees in different, usually related, jobs at a given point in time. The matrix illustrates and can be used to understand how individuals move from one status to another, for instance from outside the firm to a specific job, or from a specific job (e.g., sales rep) to another job (e.g., sales manager). It simply shows proportions of individuals in different jobs and in so doing allows an HR analyst to understand movement into and out of these jobs. Transitional matrices are useful for both charting historical trends and also making plans about the future – but this assumes that trends in the future will be constant or similar to the past. One can easily look at a transitional matrix and see where labor supply for a particular job is coming from and then choose to change, modify supply from a given source and expect that the supply will then change by a proportion or percentage that is indicated by that source. The transition matrix is useful for affirmative action and EEO purposes because it tells you where you are getting your labor supply from, and you can estimate the numbers or proportions of persons from various backgrounds in these sources. In this connection, a workforce utilization review is a comparison of the proportion of a firm’s workers in a particular subgroup within a particular job or occupation with the relevant outside labor market to determine if persons in that subgroup (e.g., Hispanics or Women) are being under-utilized. Under-utilization occurs when there proportion of persons in a subgroup in the labor market is to some degree larger than that in the particular job or occupation. A very important point here is that firms are increasingly in competition with other firms for limited amounts of talented workers. Thus, competitors are an important benchmark when it comes to looking at labor supply. Besides a transitional matrix, other important sources of information about labor supply can come from department or division managers, industry growth projections, educational institutions and government agencies (such as the Department of Labor and, more specifically, the Bureau of Labor Statistics). More sophisticated firms may also have talent inventories, which are databases with employee records, which included their KSAs, their interests and career goals. An analysis of internal labor supply – and talent inventories – are important when it comes to succession planning, which is the identification of employees who can be successors for important or high-level positions. It is important to note that firms do not only look internally to think of where labor comes from. Firms must choose whether to source labor internally or externally, and each option can have pros and cons. For instance, current employees may require training and development to move into a position, but going external can require recruiting and other additional costs.
Predicting labor supply, what is a transitional matrix? Shows the proportion of employees in different jobs at a given point in time and those jobs are related. Whole foods jobs, looking at proportions of those jobs and how people are moving into and out of those jobs, and levels, across time.
Forecasting Stage of HR Planning - Determine Labor Surplus or Shortage
Once forecasts for labor demand and supply are known, the planner can compare the figures to ascertain whether there will be a labor shortage or labor surplus for the respective job categories. When this is determined, the organization can determine what it is going to do about these potential problems. By comparing forecasts for labor supply and demand for specific jobs, the organization can determine what it needs to do in terms of avoiding and remedying labor surpluses and shortages. There are a variety of alternative methods for addressing surpluses and shortages, which will be considered next.
Goal Setting & Strategic Planning step in HR Planning:
Once predictions around labor demand and supply have been estimated, it is important – necessary – to set goals for the future and for the rest of the HR planning process. These goals need to be aligned with the firm’s business and HR strategies, which will be related to the firm’s workforce needs, as well as predictions about surpluses and shortages. For instance, if a firm’s business strategy changes to place an emphasis on customer service, it will be important to change the HR strategy to emphasize and support customer service. This will require changes to various HR policies and practices. For instance, job descriptions could be changed to emphasize customer service aspects of various jobs. It may be the case that goals would need to be set for new jobs that support the new higher-level strategies, or that an re-orientation around moving from internal staffing to external staffing for key customer service positions. The point here is that goal setting and planning needs to be related to and supportive of higher-level strategies, not just predictions about labor shortages and surpluses. These specific goals will provide targets for planning, as well as benchmarks for success. In other words, in the program implementation and evaluation phase, the firm can look back to these goals to analyze the extent to which they were successfully addressed so as to determine the extent to which the planning process was successful. The firm will need to set specific quantitative goals as to the numbers of proportions of workers needed in specific jobs and from specific sources. To do so, various methods for avoiding or reducing labor surpluses and shortages will need to be considered. These methods differ on a number of important dimensions, and they each have tradeoffs.
Options for Reducing Expected Labor Surplus
Methods differ in the speed by which they can be implemented, as well as the extent of human suffering that is likely to be encountered. For instance, downsizing is fast, which is generally good for the firm, but human suffering can be high for workers, for communities and even for employees who remain with the firm. In contrast, other methods are fast but with lower human suffering, such as work sharing. Work sharing is when a firm adopts a shorter work week with less pay for each worker, which is a situation which workers generally share in. In this way, each worker’s pay is reduced, but the firm can avoid layoffs.
Other methods, such as early retirement, have relatively little human suffering, but need to be planned for far in advance because they are much slower in terms of implementation. Given that downsizing is so common, and since early retirements are increasingly being considered by firms, let’s consider each of these in a bit more detail.
Downsizing:
Downsizing is the planned elimination of large numbers of workers so as to enhance a firm’s organizational effectiveness. There are a variety of reasons why firms might plan to downsize, which could include reducing labor costs, changes in technology that reduce the need for labor (such as the case with robotics, for instance, or automated technologies more generally), mergers and acquisitions wherein classes of workers are downsized, such as middle-management, and firm’s relocating to other locations, for instance, to do business more cheaply. Many U.S. firms have gone through downsizing for these reasons, and many of them have done so to offshore work to other countries. Downsizing can have a short-term benefit in terms of a drastic reduction in costs and therefore the firm may appear more profitable to analysts. Most firms (80%) say that they went through a downsizing to lower costs and increase profits. That said, there is a large amount of evidence that downsizing can hurt firms in the long-run. Downsizing is often done in a non-strategic way. That is, reductions are often across-the-board, where entire classes of workers may be let go. Instead, it is useful to carefully consider which workers should be let go based on which jobs are key to a business’ strategy, and which workers have key talent based on, for instance, previous performance appraisals. In this sense, downsizing can be more surgical so to speak. Other problems often surface related to, for instance, loss of key talent and institutional knowledge, as well as reduced job attitudes and performance among workers who remain with the firm. Downsizing can also hurt a firm’s image and attractiveness, thus damaging its ability to recruit qualified workers. Downsizing seems to be particularly damaging to firms that engage in high performance work practices, that are R&D-oriented, or for service-oriented, high customer contact businesses. One study of 52 Fortune 100 firms shows that most firms that announce a downsizing campaign show worse, rather than better, financial performance. Human suffering is also a consideration, and human suffering can be high in both the short- and long-term. For instance, employees who are downsized will obviously have to find new employment, which has high costs, and employees who remain with the organization may also have negative experiences related to guilt about the downsizing and anxiety about employment security. Downsizing obviously needs to be done in a very deliberate, strategic and careful way so as to maximize benefits to the firm and reduce adverse outcomes to workers. Downsizing – and offshoring – were very much the center of attention in the 80’s and into the 90’s with U.S. auto manufacturers, such as General Motors in Flint, Michigan.
Early Retirement Programs:
As we all know, the average age of the U.S. workforce is increasing. This is due to both the “greying of the workforce”, or the increasingly large proportion of older workers in the workforce, as well as the increasingly low proportion of younger workers and low fertility rates in the U.S. and other industrialized societies. Older workers in the U.S. are choosing to work longer for various reasons including longer lifespan and improved health, fears about retirement income including social security, the fact that mandatory retirement is illegal, and of course to the volatility of various markets and thus changes to housing prices and also the security of retirement investments and income. Thus, when firms are facing labor surpluses in certain positions and these positions are comprised of some proportion of older workers, it is important to consider voluntary retirement programs through, for instance, retirement incentives. Yes, these cost money, but in certain cases it may be more useful, including more cost-effective, to convince certain workers to retire early than it would be for them to be on payroll due to their relatively high salaries and benefits costs. Of course, it is ideal to try to incentivize lower-performing workers to retire while making efforts to retain those workers who contribute the most. It is also important that early retirement programs be connected to successful HR planning. Many firms have had to hire-back workers who had chosen to go on early retirement due to loss of talent and unexpected labor shortages, which can be very costly.
Options for Avoiding Expected Labor Shortage
Next, let’s consider options for avoiding an expected labor shortage. As with options for addressing a labor shortage, these options carry with them both pros and cons. They vary according to how quickly they can be implemented, and faster implementation is usually better for addressing a labor surplus, as well as revocability, and relatively high revocability is in the best interest of employers. For instance, if demand for a particular product or service increases unexpectedly, and there is an increased and immediate need for more labor, overtime may be useful. This can be implemented quickly and it is high on revocability. In this same situation, technological innovation wouldn’t be useful because it is too slow to implement. Hiring temporary workers could be an option as well, and this option is similar to overtime in that it is quickly implemented and high on revocability. That said, it may be more costly to hire temporary workers given the need to recruit, train and go through a process of hiring – depending on how much wages are and what overtime costs would be. So in this sense, it is important for firms to plan carefully for labor shortages and to have strategies for avoiding or addressing them with different contingencies and options.
Employing temporary workers
Some strategies can be turned on and off fairly painlessly, such as the use of overtime and/or temporary employees. Operational flexibility is the primary reason for this, although the use of temps also frees the firm from many administrative tasks and financial burdens (health insurance, pension, worker’s compensation, life insurance, etc.). Smaller companies may use temporary agencies to do their employment screening for them. Training may be done by the agency as well. Temporary employees bring a fresh perspective to the firm, particularly if they have temped in a number of other organizations.
