Week 5

Question 1

Explain ‘workforce planning’

Answer 1

• The process of predicting an organization’s future employment needs and the availability of current employees and external hires to meet those employment needs and execute the organization’s business strategy.
• Workforce planning is the foundation of strategic staffing because it identifies and addresses future challenges to a firm’s ability to get the right talent in place at the right time to execute its business strategy.
• The availability of the talent needed to execute a desired business strategy will influence whether that strategy is ultimately successful.

Question 2

Outline ‘the workforce planning process’

Answer 2

1. Identify the business strategy.
2. Articulate the firm’s talent philosophy and strategic staffing decisions – promoting, retaining, training and development?
3. Conduct a workforce analysis. Forecast supply and demand
4. Develop and implement action plans. Develop action plans to address any gaps between labour demand and labour supply forecasts.
   - The action plans should be consistent with the firm’s talent philosophy, and can include recruiting, retention, compensation, succession management, and training and development.
   - Action plans can be short-term or long-term, depending on the firm’s needs and the predictability of the environment.
5. Monitor, evaluate, and revise the forecasts and action plans. As the environment changes, forecasts and action plans may need to change as well.

Question 3

Explain ‘forecasting’

Answer 3

• Given the uncertainty of forecasts, construct estimates as a range, providing low, probable, and high estimates.
• Recalculate estimates as changes happen in the organization’s internal and external environments and as the firm’s assumptions and expectations change.

Question 4

Outline how you forecast business demand

Answer 4

• An organization’s product demand directly affects its need for labor
• Locate reliable, high-quality information sources within and outside of the organization to forecast business activity and need for labour based on business demand – can determine if more or less employees are needed – ABS, Industry reports, consumer surveys, Economic reports
• Types of business activity forecasts:
  
  • Seasonal peaks and troughs
  • Interest rate variations
  • Currency exchange variations
  • Competitors
  • Industry and economic – consumer sentiment
  • Others

Question 5

Outline how you forecast labour demand

Answer 5

• It is a good idea to identify minimal as well as optimal staffing levels when analyzing labour demand.
• An organization’s demand for labour depends on its forecasted business activity and its business needs, which depend on its business strategy.
• Business needs can include things like:
  
  • Achieving the staffing levels necessary for generating a given amount of revenue within a particular period of time (e.g., salesperson staffing levels necessary to generate $5 million of revenue within 6 months)
  • Increasing staffing levels to execute a growth strategy
  • Decreasing staffing levels during a restructuring or reduced demand (Holden, Toyota)
  • Obtaining the new talents needed to create new products or provide different services

Question 6

Define ‘staffing ratio’

Answer 6

A mathematical way of calculating the number of employees a firm needs to produce certain levels of output

Question 7

Discuss ‘ratio analysis’

Answer 7

• Assumes that there is a relatively fixed ratio between the number of employees needed and certain business metrics.
• Using historical patterns within the firm helps to establish a reasonable range for these ratios.
• This process can be used for either justifying new positions or demonstrating the need for layoffs.
• Need consistent historical trends to calculate ratios

Question 8

Outline some possible ratios

Answer 8

Production to employees
Revenue per employee
Managers to employees
Inventory levels to employees
Number of customers or customer orders to employees
Labour costs to all production costs
The percentage utilization of production capacity to employees

Question 9

Define ‘trend analysis’

Answer 9

Using past employment patterns to predict future needs.

Question 10

Discuss ‘trend analysis’

Answer 10

• Uses past employment patterns to predict future needs.
  For example, if a company has been growing five percent annually for the last eight years, it might assume that it will experience the same five percent annual growth for the next few years.
• Any employment trends that are likely to continue can be useful in forecasting labour demand.
• Because so many factors can also affect staffing needs, including competition, the economic environment, and changes in how the company gets its work done (e.g., automation might improve productivity), trend analysis is rarely used by itself in making labour demand forecasts.

Question 11

Define ‘judgmental forecasting’

Answer 11

Relying on the experience and insights of people in the organisation to predict a firm’s future employment needs

Question 12

Discuss the approaches to judgmental forcasting

Answer 12

• Relies on the experience and insights of experienced people in the organization to predict future needs.
• Top-down: organizational leaders rely on their experience and knowledge of their industry and company to make predictions about what future staffing levels will need to be. Top managers’ estimates then become staffing goals for the lower levels in the organization.
  In some cases, particularly when companies are facing financial difficulties or restructuring, budgets may determine these headcount numbers.
• Bottom-up: uses the input of lower-level managers in estimating staffing requirements. Based on supervisors’ understanding of the business strategy, each level provides an estimate of their staffing needs to execute the strategy. The estimates are consolidated and modified as they move up the organization’s hierarchy until top management formalizes the company’s estimate of its future staffing needs into staffing goals.

Question 13

What is the role of judgement?

Answer 13

• Because historical trends and relationships can change, it is usually best to supplement the more mechanical ratio, scatter plot, and trend forecasting methods with managerial judgment.
• The more mechanical methods can be used as a starting point and managerial input then used to modify the estimates.

Question 14

Discuss return on investment analysis

Answer 14

• Estimate the return on investment from adding a new position based on the costs and outcomes resulting from that new hire.
• First assign dollar values to the benefits you expect from a new hire for the period of time most appropriate for the position and your organization.
  
  • How much revenue during the period will be directly generated as a result of this position?
  • How much money per period will this position save your organization in terms of increased efficiency, and how much value will it add in greater productivity, quality, or customer service?
• Then compare this amount with the cost of adding the new hire. Compute the cost of hiring, including advertising the position, interviewing, screening, travel, relocation, and training expenses. Add this to the compensation for the new position during the time period to get your initial investment.
• Compare this amount with the value your company will gain to determine the return on the investment of adding the new position.

Question 15

Outline how you forecast the labour supply

Answer 15

Combining current staffing levels with anticipated staffing gains and losses results in an estimate of the supply of labor for the target position at a certain point in the future.
Anticipated gains and losses can be based on historical data combined with managerial estimates of future changes.
- The external labour market consists of people who do not currently work for a firm.
- A firm’s internal labour market consists of the firm’s current employees.

Question 16

Define ‘talent inventories’

Answer 16

A detailed record or database that summarises each employee’s skills, competencies, and qualifications

Question 17

Discuss how you forecast the internal labour market

Answer 17

• Estimate the competency levels and number of employees likely to be working for the company at the end of the forecasting period.
• To forecast internal talent resources for a position, subtract anticipated losses from the number of employees in the target position at the beginning of the forecasting period.
  
  • These losses may be due to factors including promotions, demotions, transfers, retirements, and resignations. In tighter labour markets when workers are harder to find, more employees than usual may leave the organization to pursue other opportunities than leave during looser labour markets when jobs are less plentiful.
  • Anticipated gains for the position from transfers, promotions, and demotions are then added to the internal labor supply forecast.

Question 18

Discuss ‘transition analysis’

Answer 18

• A quantitative technique used to analyze internal labour markets and forecast internal labour supply.
• A simple but often effective technique for analyzing an organization’s internal labour market, which can be useful in answering recruits’ questions about career paths and the likelihood of promotions as well as in workforce planning.
• Can also forecast the number of people who currently work for the organization likely to still be employed in various positions at some point in the future.
• The analysis is best performed for a limited number of jobs at a time to keep it easily interpretable.

Question 19

Discuss how you would ‘forecast the internal market’

Answer 19

• Judgment of senior, experienced employees
• Talent inventories: summarize each employee’s skills, competencies, and qualifications
• Replacement charts: visually shows each of the possible successors for a job and summarizes their present performance, promotion readiness, and development needs
• Employee surveys to identify the potential for increased turnover in the future
• Labour supply chain management: The basic foundation of any supply chain model is to have the right product, in the right volume, in the right place, at the right time, with the right quality
  
  • Businesses use multiple suppliers so that they can quickly change and scale to meet changing business needs.
  • Supply chain management principles of inventory management, planning, and optimization can be easily applied to people.
  • Software and services allow companies to match employees’ expertise and knowledge to business needs and deploy the right people just as assets would be deployed in a supply chain.

Question 20

Define ‘replacement chart’

Answer 20

Visually shows each of the possible successors for a job and summarizes their present performance, promotion readiness, and development needs

Question 21

Discuss how you would ‘forecast the external labour market’

Answer 21

• Organizations monitor the external labour market in two ways.
  
  • The first is through their own observations and experiences. For example, are the quality and quantity of applicants responding to job announcements improving or getting worse?
  • The second way is by monitoring labour market statistics generated by others, such as the Australian Bureau of Statistics reports.

Question 22

Explain how you would ‘resolve labour supply/demand gaps’

Answer 22

• Action plans proactively address an anticipated surplus or shortage of employees.
• Understanding whether a shortage or surplus of applicants is the result of temporary factors or whether it reflects a trend that is likely to continue is important because different staffing strategies are appropriate for each.

Question 23

Define ‘ business process outsourcing’

Answer 23

Relocating an entire business function to an independent service provider e.g. call centers to India

Question 24

Discuss how you would resolve a ‘temporary staffing shortage’

Answer 24

• Because higher salaries cost the organization more money throughout the new hire’s tenure with the company, hiring inducements that last only as long as the talent shortage does are often better.
• Companies often turn to more expensive recruiting methods such as search firms, or lower their hiring standards so that more recruits are considered qualified.
  
  • Neither of these strategies is guaranteed to work
  • More expensive recruiting methods may quickly drain a recruiting budget without resulting in an acceptable hire
  • Lowering hiring standards decreases the quality of the company’s workforce, which may not be acceptable
• Options include offering hiring incentives such as sign-on bonuses and retention bonuses such as stock options or cash to be paid after the employee has successfully worked with the company for a certain period of time.

Question 25

Discuss how you would resolve a ‘persistent talent shortage’

Answer 25

If it is likely that a worker shortage will last a number of years, an organization must:
- Reduce its demand for the talents that will be in short supply by increasing their use of automation and technology, and by redesigning jobs so that fewer people with the desired talent are needed.
- And/or increase the supply of employees with the qualifications it needs
This is not a fast or practical solution for most organizations.

Question 26

Discuss how you would resolve a ‘temporary employee surplus’

Answer 26

• If slowdowns are cyclical or happen frequently, using temporary or contingent workers who are the first to be let go when business slows can help to provide a buffer around key permanent workers.
• Temporary layoffs may need to last more than six months to be cost-effective due to severance costs, greater unemployment insurance premiums, temporary productivity declines, and the rehiring and retraining process - Losing the investments the organization has already made in hiring and training the laid off workers can also be costly.
• Alternatives to layoffs include across-the-board salary cuts or a reduction in work hours, or reallocating workers to expanding areas of the business.

Question 27

Discuss how you would resolve a ‘permanent employee surplus’

Answer 27

• Early retirement incentives, voluntary redundancies, layoffs, and not filling vacated positions can all reduce an employer’s headcount, but with a cost.
  
  • Early retirement programs can result in the most skilled and productive employees leaving the organization.
  • Layoffs can damage workforce morale and hurt the firm’s reputation as an employer.
  • Not filling open positions can leave key positions in the organization vacant or understaffed. Who will do their job?
• Action plans to address a persistent employee surplus may also involve re-assignments, hiring freezes, and steering employees away from careers in that position to reduce the need for future layoffs.
• Retraining employees to fill other jobs in the firm can help bring labour supply and demand into balance.

Question 28

How should ‘staff planning’ be conducted?

Answer 28

The three questions that need to be answered are:

1. How many people should we recruit? ( see Staffing yields, hiring yields and selection ratios)
2. What resources do we need? (see Workload-driven forecasting and Staffing efficiency driven forecasting)
3. How much time will it take to hire? Continuous recruiting can shorten the hiring timeline (see Continuous recruiting)

Question 29

Define ‘staffing yields’

Answer 29

the proportion of applicants moving from one stage of the hiring process to the next

Question 30

Define ‘hiring yields’

Answer 30

the percent of applicants ultimately hired

Question 31

Define ‘Workload-driven forecasting’

Answer 31

Based on historical data on the average number of hires typically made per recruiter

Question 32

Define ‘Staffing efficiency driven forecasting’

Answer 32

The total cost associated with the compensation of the newly hired employee

Question 33

Define ‘Batch recruiting’

Answer 33

Recruiting a new applicant pool each time

Question 34

Outline some of the ‘external costs’ associated with recruitment and selection

Answer 34

External cost per hire: six basic elements account for 90% of the costs to hire to calculate the cost of external hiring:
- Advertising expenses
- Agency and search firm fees
- Employee referral bonuses
- Recruiter and applicant travel costs
- Relocation costs
Company recruiter costs (prorated salary and benefits if the recruiter performs duties other than staffing)
Saratoga Institute adds an additional 10% to cover miscellaneous expenses including testing, reference checking, hiring manager time, and administrative support

Question 35

Outline some of the ‘internal costs’ associated with recruitment and selection

Answer 35

Internal cost per hire includes five elements:

1. Internal advertising costs
2. Travel and interview costs
3. Relocation costs
4. Internal recruiter costs
5. Cost of hiring replacement if internal person hired