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Organizational Structures

  1. Relative Valuation
  2. Joint Stock Company
  3. Organizational Structure
  4. C-Suite
  5. Operations Management
  6. Human Resource Planning
  7. Corporate Governance
  8. Upper Management
  9. Fraternal Organization

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Definition of Human Resource Planning (HRP)

Updated: November 18, 2022

Many high-ranking executives in businesses claim that people are their number one resource. Businesses want to maintain employee retention, as well as attract skilled, potential employees. Being able to hold onto a skilled workforce can be a challenge sometimes, but there is a business strategy that can help.

Human resource planning, or HRP, involves creating plans centered around all employees. This includes current employees and potential employees. This is one of the best ways to ensure success in a business. Learn all about human resource planning and how it can help your business in this definitive article!

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    KEY TAKEAWAYS

    • Human resource planning is the best way for a business to ensure that they have the best workforce based on its needs.
    • HRP encompasses all steps of the employment process.
    • When your business has an effective HRP strategy, you can consistently hire the best talent and grow your business.

    What Is Human Resource Planning (HRP)?

    At its core, human resource planning (HRP) is a strategy used by businesses regarding employees. Businesses want to maintain a steady influx of qualified employees that can help them attain success. HRP is also called workforce planning or human resource management. It is an essential key in growing a business of any size.

    HRP requires a company to look at its needs and plan ahead to meet those needs. It has to predict what kind of a workforce a company is going to need to accomplish future goals. It also has to take into account how to handle any possible talent shortage. A strategic plan addresses organizational goals and future demand, as well as current goals. 

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    HRP Is Ultimately a Numbers Game

    When creating a good human resource strategy, a company has to carefully balance the workforce with demand. Strategic goals require a human resource manager to have a full understanding of the business environment. This comes with some serious challenges.

    The workforce in any company is constantly changing. Employees may be sick or on vacation. They will also leave, which affects the employee turnover rate. Talent management requires a lot of juggling, which can be intimidating for some businesses. 

    For comprehensive human resource plans, managers have to consider the following:

    • How to find and attract skilled employees
    • How to select, train, and reward the best prospective employees
    • How to handle absences or conflicts in the workplace
    • How to promote employees and how to dismiss others

    HRP is a continuous process, and it changes with cultural shifts in the workplace.

    The Human Resource Planning Process

    Human resource planning is largely a standardized process. Most companies break down their strategic workforce planning into four steps. These steps address all areas of HRP and allow businesses to stay on top of their workforce.

    Step 1: Analyze Labor Supply

    Understanding a company’s current human resources supply is a major part of HRP. In this step, human resources break down their current labor supply and analyze numerous areas. These areas include:

    • Number of Employees: How many people the company currently employs
    • Skills of Current Employees: All employees have their skills analyzed in relation to their positions
    • Qualifications: The qualifications each employee holds in relation to their position
    • Employee Benefits: The benefits that each employee is receiving
    • Performance Level: How an employee is currently performing in their current position

    All of these factors need to be taken into consideration regarding the organization’s strength. They inform all of the future decisions of human resources regarding HRP.

    Step 2: Forecasting Labor Demand

    After the current workforce gets evaluated, human resources must determine the company’s future plans. This requires analyzing the organizational goals the business has and how they apply to the workforce. As HR reviews this, they can begin to create plans for the current workforce. These plans may include:

    • Promotions: Promoting employees from within that are performing exceptionally
    • Retirements: Reviewing which employees may be retiring soon and initiating a discussion
    • Layoffs: Removing employees from the workforce that are not making meaningful contributions
    • Transfers: Moving employees to areas where their skills are better suited

    This step in the process is not entirely internal. Many outside factors can affect the decisions outlined above. Factors like new technology may remove the need for employees or introduce the need for new skill sets.

    Step 3: Balancing Supply and Labor Demand

    Similar to forecasting labor demand, HR must also forecast the employment demand. This involves making sure that the current employees of the company are able to meet the company’s labor needs. Often, the best way to do this is by performing a gap analysis. Gap analysis allows HR to align a company’s workforce with its future demand.

    In order to do this, a human resource manager must ask themselves a series of questions. The answers to these questions provide insight into the company’s future needs. Some of these questions may include:

    • Do employees need to learn new skills to satisfy the company’s labor demand?
    • Are more managers needed to improve the company’s performance?
    • Are all employees in the roles that they should be currently?

    Balancing supply and labor demand is kind of like putting a puzzle together. You have to find where each piece fits best. Unfortunately, this metaphorical puzzle isn’t as straightforward as a little one. The shape of the business is constantly changing, as are the employees. This means HR must continue to move things around as necessary.

    Step 4: Develop and Implement a Plan

    Ultimately, the answers to the gap analysis in Step 3 determine what needs to happen within the company. This is where all of the research and forecasting get addressed with an HRP. There are many different things that can get done in terms of a plan.

    Implementation of the plan involves meeting with key players and telling them what will happen moving forward. Training, promotions, and layoffs need to be addressed promptly. They also need to be addressed respectfully. Employee satisfaction is a large part of the HRP process, and employees must be met with dignity.

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    Understanding Talent Strategies and New Hires

    A major part of the HRP process is attracting and hiring skilled employees. As such, talent strategies for this process have to be developed as well. The process is fairly straightforward and is very clearly segmented.

    Recruiting

    Recruitment is always the first part of a talent strategy. Recruiting involves finding and attracting applicants that fit your company’s future needs. There is a wide range of ways to recruit new employees, but some of the most common are:

    • Posting on online job boards
    • Searching professional social networks
    • Incentivizing referrals from current employees

    By doing these three things, you can enlarge your talent pool immensely. Companies can no longer rely solely on applicants walking through the front door and asking for a job. Instead, businesses have to seek out the best potential employees on their own. All companies are competing to hire the best people from the talent pool.

    Selection (Interviews)

    Once a pool of qualified candidates gets secured, it’s time to start narrowing the field down further. A business has to conduct interviews with all potential employees. This lets the business learn more about a candidate’s skills, as well as how they’ll fit into the workplace culture. Interviews should rely on previously forecasted labor and demand needs. This helps HR find candidates that will fit the future roles of the business.

    Hiring

    This part of talent development is the only step that’s out of the company’s control. The company determines what they’d like to offer the potential employee in terms of salary and benefits. After an offer gets extended, the candidate can accept the offer or deny it. They may respond with a counteroffer. At that point, the company must decide if the counteroffer is acceptable. Another option is to enter negotiations with the candidate in order to find an acceptable middle ground.

    Training and Development

    After new employees come on board, it’s time to train them to fit the company’s needs. This process is also known as onboarding. They should get any and all policies regarding the company, as well as what you expect of them as an employee. Training to help them get used to the company’s procedures, as well. Now that they’re a part of the company, it’s time to get them up to speed.

    Dispersing Salary and Benefits

    Following the onboarding of new hires, it’s time to take a look at salary and benefits. For the most part, benefits packages are standard across the board. However, salary is something that needs to be considered heavily.

    When hiring new employees, it’s important to offer a competitive salary. This keeps them happy and ultimately determines whether or not they’ll accept the offer of employment. Where most businesses fall short is in reviewing the salaries of their current employees. If new hires are being paid substantially more than current employees, then salary adjustments may need to take place. This keeps all of your employees satisfied and prevents any loss of employees.

    Performance Monitoring and Management

    Apart from the hiring process, HR is also responsible for performance monitoring and management. Monitoring employees for productivity and performance is key to a company remaining successful. Employees must perform at a certain level to maintain employment. If they don’t, they may need to enter into a performance management program. This helps them get back on track and improve their productivity.

    Employee Relations

    Finally, employee relations need to consistently be considered. When you maintain a safe, satisfying workplace, you’re more likely to attract top talent to your company. Make sure that employee relations are always positive. It will improve employee retention as well as talent development overall. 

    Summary

    Implementing a Human Resources plan will help you manage your company’s day-to-day operations. Be sure to check out FreshBooks for powerful tools to manage your company and employees.

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    FAQs About Human Resource Planning

    Why is human resources planning important?

    HRP is important because it allows businesses to maintain a consistent workforce. This allows the business to meet its organizational goals.

    Who is responsible for human resources planning?

    The human resources department is responsible for HRP.

    Does human resource planning need to be documented?

    As with anything in business, HRP should be a documented process. This allows a company to refer to the process, as well as change it when necessary.

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