# Determining Labor Supply and HR Planning

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```					  The Process of Human Resource Planning

• Organizations need to do human resource
planning so they can meet business objectives
and gain a competitive advantage over
competitors.

– Human resource planning compares the present state
of the organization with its goals for the future
– Then identifies what changes it must make in its
human resources to meet those goals
Overview of the Human Resource Planning
Process
Human Resource Forecasting

• HR Forecasting attempts      There are three major
to determine the supply      steps to forecasting:
and demand for various
types of human resources, 1. Forecasting the demand
and to predict areas         for labor
within the organization   2. Determining labor
where there will be labor    supply
shortages or surpluses.   3. Determining labor
surpluses and shortages
HUMAN RESOURCE PLANNING

FORECASTING HR REQUIREMENTS (DEMAND ANALYSIS)
(Trying to predict future staffing needs)
Managerial Estimates
Sales Projections
Simulations
Vacancy Analysis (projected turnover)

FORECASTING HR AVAILABILITY (SUPPLY ANALYSIS)
(Predicting worker flows and availabilities)
Succession or Replacement Charts
Skills Inventories (use of HRIS)
Labor Market Analysis
Markov Analysis (Transition Matrix)
Personnel Ratios
Forecasting the Demand for Labor

Trend Analysis
• Constructing and applying statistical models that predict
labor demand for the next year, given relatively objective
statistics from the previous year.

• Objective measures that accurately predict future labor
demand.
CORRELATIONS/PROJECTIONS

SIZE OF HOSPITAL   NUMBER OF NURSES

200               240
300               260
400               470
500               500
600               620
700               660
800               820
900               860
SIMULATION MODEL/REGRESSION FORECAST

TARGET STORES STAFFING FORECAST

MODEL
Y = 8 + .0011(X1) + .00004(X2) + .02(X3)

Y = Number of employees needed to staff the store
X1 = Square feet of sales space
X2 = Population of metropolitan area
X3 = Projected annual disposable income in millions of dollars

Y = 8 + .0011(50,000sq ft) + .00004(150,000popul) + .00000002(\$850 million)

Y = 8 + 55 + 6 + 17

Y = 86 employees needed at this store
VACANCY ANALYSIS
Historic departures used to project turnover

LEVEL         # EMPL    TURN %    Expected Vacancies   Expected to Remain

TOP MGMT      100       20 %                 20                   80

MID MGMT      200       24 %                 48                  152

LOW MGMT      600       22 %                 132                 468

SKILLED W     600       16%                  96                  504

ASSY WKRS     2000      12 %                 240                 1760

TOTALS        3500                           536                 2964

AVERAGE TURNOVER PERCENTAGE = 536 / 3500 =              .1531
Determining Labor Supply
Predicting Worker Flows and Availabilities

• Succession or Replacement Charts
Who has been groomed/developed and is ready for promotion right NOW?

• Human Resource Information Systems (HRIS)
An employee database that can be searched when vacancies occur.

• Transition Matrices (Markov Analysis)
A chart that lists job categories held in one period and shows the proportion of
employees in each of those job categories in a future period.
1.    “Where did people in each job category go?”
2.    “Where did people now in each job category come from?

• Personnel / Yield Ratios
How much work will it take to recruit one new accountant?
SUCCESSION PLANNING
REPLACEMENT CHART
FOR EXECUTIVE POSITIONS

POSITION REPLACEMENT CARDS
FOR EACH INDIVIDUAL POSITION

------------------------------------------------------------------------
POSITION              WESTERN DIVISION SALES MANAGER

DANIEL BEALER         Western Division Sales Mgr     Outstanding    Ready Now

PRESENT        PROMOTION
POSSIBLE CANDIDATES     CURRENT POSITION             PERFORMANCE    POTENTIAL

SHARON GREEN          Western Oregon Sales Manager   Outstanding    Ready Now
GEORGE WEI            N. California Sales Manager    Outstanding    Needs Training
HARRY SHOW            Idaho/Utah Sales Manager       Satisfactory   Needs Training
TRAVIS WOOD           Seattle Area Sales Manager     Satisfactory   Questionable

-------------------------------------------------------------------------
HUMAN RESOURCE INFORMATION SYSTEMS
(HRIS)
PERSONAL DATA
Age, Gender, Dependents, Marital status, etc
EDUCATION & SKILLS
Languages spoken, Specialty skills
Ability/knowledge to operate specific machines/equipment/software
JOB HISTORY
Job Titles held, Location in Company, Time in each position, etc.
Performance appraisals, Promotions received, Training & Development
MEMBERSHIPS & ACHIEVEMENTS
Professional Associations, Recognition and Notable accomplishments
PREFERENCES & INTERESTS
Career goals, Types of positions sought
Geographic preferences
CAPACITY FOR GROWTH
Potential for advancement, upward mobility and growth in the company
Transition Matrix
Example for an Auto Parts Manufacturer
MARKOV ANALYSIS
(STATISTICAL REPLACEMENT ANALYSIS)

TO:              A TRANSITION MATRIX
FROM:
TOP      MID      LOW   SKILLED ASSY     EXIT

TOP     .80     .02                             .18

MID     .10      .76     .04                        .10

LOW              .06      .78     .01                .15

SKILL                     .01     .84                .15

ASSY                          .05     .88     .07
------------------------------------------
MARKOV ANALYSIS – 2
(Captures effects of internal transfers)

(Start = 3500)               A TRANSITION MATRIX
FROM/ TO:        TOP        MID   LOW SKILLED ASSY                       EXIT
TOP      100       .80        .02                                          .18

MID     200        .10        .76        .04                               .10

LOW     600                   .06        .78         .01                   .15

SKILL 600                                .01         .84                   .15

ASSY 2000                           .05     .88    .07
---------------------------------------------------------
END YR WITH:      100       190         482         610          1760    [358 left]
NEED RECRUITS ?   0           10        118                       240*     368 tot
NEED LAYOFFS ?                                      (10)*                  (10) tot
KEEP STABLE 100              200        600         600          2000 = 3500 Tot
MARKOV ANALYSIS – 3
(Anticipates Changes in Employment Levels)

Employment needs are changing. We need a 10% increase in skilled workers
(660), and a 15% decrease in assembly workers (1700) by year’s end.
-------------------------------------------------------
(Start = 3500)            A TRANSITION MATRIX
FROM/ TO:         TOP MID          LOW SKILLED ASSY               EXIT
TOP      100        .80     .02                                     .18
MID      200        .10     .76      .04                            .10
LOW       600               .06      .78      .01                   .15
SKILL 600                            .01      .84                   .15
ASSY 2000                                     .05        .88        .07
---------------------------------------------------------
END YR WITH:       100     190       482        610        1760        [358 left]
NEED RECRUITS ?    0        10       118         50*
NEED LAYOFFS ?                                                 (60)*
NEW LEVELS 100            200        600        600        1700 = 3260 tot
Determining Labor Surplus or Shortage

• Based on the forecasts for labor demand and
supply, the planner can compare the figures to
determine whether there will be a shortage or
surplus of labor for each job category.
• Determining expected shortages and surpluses
allows the organization to plan how to address
these challenges.
PERSONNEL / YIELD RATIOS
Past experience has developed these yield ratios for recruiting a Cost Accountant:

FOR EVERY 12 APPLICATIONS RECEIVED, ONLY 1 LOOKS
PROMISING ENOUGH TO INVITE FOR AN INTERVIEW

OF EVERY 5 PERSONS INTERVIEWED, ONLY 1 IS ACTUALLY
OFFERED A POSITION IN THE ORGANIZATION

OF EVERY 3 JOB OFFERS MADE, ONLY 2 ACCEPT THE POSITION

OF EVERY 10 NEW WORKERS WHO BEGIN THE TRAINING
PROGRAM, ONLY 9 SUCCESSFULLY COMPLETE THE PROGRAM

THUS:                100 APPLICATIONS MUST BE RECEIVED, so that
8.33 JOB INTERVIEWS CAN BE HELD, so that
1.67 JOB OFFERS CAN BE MADE, and
1.11 PEOPLE MUST BE TRAINED, so that we get
ONE NEW COST ACCOUNTANT!!!

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