Chapter Three
Planning
G
A
Learning Objectives and Introduction
T
Learning Objectives
E
Introduction
S
Internal and External Influences
,
Organizational Strategy
Organizational Culture
Labor Markets
Technology
D
E
Human Resource Planning
A
Process and Example
Initial Decisions
N
Forecasting HR Requirements
Forecasting HR AvailabilitiesD
Reconciliation and Gaps
R
Staffing Planning
A
Staffing Planning Process
Core Workforce
Flexible Workforce
Outsourcing
1
1
Diversity Planning
2
Demography of the American Workforce
3
Business Case for Diversity
T
Planning for Diversity
S
Legal Issues
Affirmative Action Plans
Legality of AAPs and Diversity Programs
AAPs for Veterans and Individuals With Disabilities
EEO and Temporary Workers
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Summary
Discussion Questions
Ethical Issues
Applications
Endnotes
G
A
T
E
S
,
D
E
A
N
D
R
A
1
1
2
3
T
S
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Planning
91
Learning Objectives and Introduction
Learning Objectives
• Recognize internal and external influences that will shape the planning process
• Understand how strategic plans integrate with staffing plans
• Become familiar with statistical and judgmental techniques for forecasting
G
HR requirements and availabilities
• Know the similarities and A
differences between replacement and succession
planning
T
• Understand the advantages and disadvantages of a core workforce, a flexible
workforce, and outsourcingEstrategies for different groups of employees
• Learn how to incorporate diversity
into the planning process
S
• Recognize the fundamental components of an affirmative action plan
,
Introduction
D
Human resource (HR) planning is the process of forecasting the organization’s
E developing action plans and programs for fulfuture employment needs and then
filling these needs in ways thatAalign with the staffing strategy. HR plans form
the basis of all other activities N
conducted during staffing. An organization that
thoroughly considers its staffing needs and how these needs fit with the external
D to recruit the right number and type of candienvironment will find it much easier
dates, develop methods for selecting
R the right candidates, and evaluate whether its
programs are successful.
A learning about the employment environment,
Essentially, HR planning involves
determining how many employees an organization will need in the future, and
assessing the availability of employees
in both the internal and external markets.
1
The HR planning process involves several specific components that we cover in
1 planning decisions, forecasting HR requirethis chapter, including making initial
ments and availabilities, determining
2 employee shortages and surpluses, and developing action plans.
3
The chapter begins with an overview
of internal and external influences on the
T
HR planning process, like organizational
strategy and culture, labor markets, and
technology. Next, we provide anSoverview of the process of HR planning, including a review of methods for forecasting HR requirements and availability. The
staffing planning process includes distinguishing between the core and flexible
workforces, as well as understanding the environment for outsourcing. Diversity
programs have become an increasingly important part of the staffing planning process, so they are also discussed. The major legal issue for HR staffing planning
is that of affirmative action plans (AAPs). A different legal issue, that of equal
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Support Activities
employment opportunity (EEO) coverage for temporary employees and their agencies, is also discussed.
Internal and External Influences
Planning does not occur in a vacuum. All aspects of the planning process must consider both internal and external influences. The two most important internal influences on the planning process are theG
organization’s strategy and the organization’s
culture. There are three major sourcesA
of external influence on HR and staffing planning, namely, product market conditions, labor markets, and technology. Exhibit 3.1
T
provides specific examples of these influences,
which are discussed next.
Organizational Strategy
E
S
influence
,
The first, and most important,
on the planning process is the organization’s overall strategy. Staffing managers must be intimately familiar with all
aspects of the organization’s future plans and goals so they can respond by hiring
D
E
A
Exhibit 3.1 Examples of Internal and External Influences on Staffing
N
ORGANIZATIONAL
D STRATEGY
• Current financial and human resources in the organization
R
• Demand for products and/or services
• Competitors and partners
A
• Financial and marketing goals
ORGANIZATIONAL CULTURE
1
• The expressed vision of executives
• The degree of hierarchy and bureaucracy
1
• Style of communication
2
•
•
•
•
LABOR MARKETS
3 KSAOs sought
Labor demand: employment patterns,
Labor supply: labor force, demographic
trends, KSAOs available
T
Labor shortages and surpluses
S
Employment arrangements
TECHNOLOGY
• Elimination of jobs
• Creation of jobs
• Changes in skill requirements
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Chapter Three
Planning
93
the right number of people with the right KSAOs (knowledge, skill, ability, and
other characteristics) in a timely manner. Some of the techniques we will review
for staffing planning are based on a view of the organization’s historical staffing
levels. This is a good place to start, because previous practice is an important guide
to setting a baseline for future needs. However, all planning must be conducted
with an eye to the future as well.
The Society for Human Resource Management proposes that strategic planning
involves a thorough knowledge G
of the organization’s current situation as well as a
sense of the strategic vision of the organization.1 Breaking down the organization’s
A and threats (SWOT) is a common method
strengths, weaknesses, opportunities,
for understanding strategy. The T
internal assessment phase of the SWOT analysis
focuses on physical and financial
E resources, as well as structure and culture. The
external assessment phase looks to learn about economic, demographic, and techS the organization in the future.
nological trends that will influence
Effective staffing planning must
, begin with a dialogue between HR representatives and organizational leaders.2 HR managers should be aware of core aspects of
the organization’s operations, including financial and marketing considerations.
Additionally, it is important to D
see how the organization sees itself changing in
the future so that staffing strategies
E to meet these needs can be developed. Participating in activities like annual planning meetings and reviewing financial stateA experts emphasize that this dialogue must be a
ments are essential. Strategic HR
two-way communication. In many
N cases, the current workforce and its capabilities
will influence overall organizational plans. HR managers who are aware of internal human capital resources willDbe much more effective in an advisory capability
when discussing future plans with
R the other executives.
Organizational Culture
A
Organizational culture is a very1complex topic, in part because culture is so difficult to define. In essence, culture is the set of intangibles that influences attitudes
1 of the factors that can influence an organiand behavior in organizations. Some
zation’s culture include the expressed
vision of executives, the degree of hierar2
chy and bureaucracy, the history of interactions among departments, and the style
3 organization. For example, an organization in
of communication throughout the
T are emphasized will call for a very different set
which structure and predictability
of staffing practices relative to an
Sorganization in which flexibility and innovation
are core values. The relationship between the organization and labor unions or
other employee organizations (such as professional organizations like the American Medical Association or the state Bar Association) is also an extremely important part of culture. To understand culture, HR managers should spend time talking
with senior executives, administer and evaluate employee survey data, and conduct
focus groups.
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Just because culture is intangible does not mean it is not important. Michael
Davis, the chief human resources officer at General Mills, encourages HR managers to build “an integrated set of programs and policies that reinforce and bring
value to life.” He further notes that when the company’s espoused values are inconsistent with the practices that employees encounter on a day-to-day basis, problems
with motivation, communication, and retention will follow.3 Matching culture to
planning occurs in numerous ways. Deciding the types of attitudes and values that
employees should have in order to G
achieve a person/organization fit is entirely
dependent on culture. An organization with a participative culture should ensure
that planning involves representativesAfrom many different perspectives. Decisions
related to how succession planning should
be managed are also influenced by the
T
degree to which the organization’s members
value opportunities for growth and
E
development relative to stability and predictability. These are just a few of the ways
S process.
in which culture can impact the planning
In conjunction with the staffing ,planning process, the organization’s staffing
philosophy should be reviewed. The results of this review help shape the direction
and character of the specific staffing systems implemented. The review should
focus on internal versus external staffing
D and diversity philosophy.
External and internal staffing is aEcritical matter because it directly shapes the
nature of the staffing system, as well as sends signals to applicants and employees
A
alike about the organization as an employer.
Exhibit 3.2 highlights the advantages
and disadvantages of external and internal
staffing.
Clearly there are trade-offs to
N
consider in deciding the optimal internal-external staffing mix. The point regardD
ing time to reach full productivity warrants
special comment. Any new hire, either
internal or external, will require time
R to learn the new job and reach a full productivity level. In some ways, external
A hires may be able to reach job productivity faster. This is because external hires are usually selected because they have
experience in a job similar to the one they will be taking, whereas internal hires
are promoted into jobs they have not1previously held. On the other hand, internal
new hires have an advantage in terms of person/organization fit because they are
1
already familiar with the culture, policies,
procedures, and relationships among
organizational members. Internal hires
may
have
also received special training and
2
development to prepare them for the3new job.
In terms of diversity, the organization must be sure to consider or develop a
T a diversity-conscious employer and the
sense of importance attached to being
commitment it is willing to make S
in incorporating diversity elements into all
phases of the staffing system. As we describe later in the chapter, an organization’s overall philosophy toward diversity will be shaped by the cultural value the
organization attaches to diversity as well as the b usiness-related consequences
of diversity-related practices. Many choices throughout the staffing process
will follow from the organization’s attitudes toward diversity, ranging from
deciding where to recruit to what types of qualifications are most important for
new hires.
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Chapter Three
Exhibit 3.2
Planning
95
Staffing Philosophy: Internal Versus External Staffing
Advantages
Disadvantages
• Positive employee reactions
to promotion from within
• No new KSAOs into the
organization
•
• May perpetuate current
underrepresentation of
minorities and women
Internal
•
G
Quick method to identify
A
job applicants
T
E
Less expensive
S
,
• Less time required to
reach full productivity
• Inexperienced employees may
require more training time
•
• Negative reaction by internal
applicants
•
External
•
D
E
A
Brings in employees with
new KSAOs
N
D
Larger number of minorities
and women to draw from
R
A
Large labor market to draw
from
1
• Experienced employees may
require less training time1
Labor Markets
• Small labor market to
recruit from
• Time-consuming to identify
applicants
• Expensive to search external
labor market
• More time required to
reach full productivity
2
3
T
S
In and through labor markets, organizations express specific labor preferences
and requirements (labor demand), and persons express their own job preferences and
requirements (labor supply). Ultimately, person/job matches occur from the interaction of demand and supply forces. Both labor demand and supply contain quantity and quality components, as described below. Labor shortages, labor surpluses,
and a variety of possible employment arrangements are also discussed.
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Labor Demand: Employment Patterns
Labor demand is a derived demand, meaning it is a result of consumer demands
for the organization’s products and services. Knowing the organization’s strategy
and projections for future KSAO needs will guide the search for labor demand
information. In particular, the labor market for the occupations the organization
needs to staff will be greatly affected by the product market. For example, in the
field of software design, the increased use of tablet computers since 2010 increased
G skills in designing applications for related
demand for programmers who gained
operating systems.
A
To learn about labor demand, national employment statistics are collected and
T
analyzed. They provide data about employment
patterns and projections for industries, occupations, and organization size.
E Most organizations will need to examine
not just aggregated statistics, like the overall unemployment rate, but also occuS As an example, the Bureau of Labor Stapational and regional employment data.
,
tistics in 2013 estimated that the unemployment
rate for structural iron and steel
workers was 21.9% and the rate for telemarketers was 23.1%. At the other extreme,
the unemployment rate for physician assistants was 1.2% and the rate for petroD
leum engineers was 0.6%.4
Projections to year 2018 indicate that
E most job growth will occur in the services
sector, led by the education and health services industries, followed by business
A
and professional services. Manufacturing
and federal government employment
will remain steady, and declines willN
occur in mining and agriculture.5
D
Labor Demand: KSAOs Sought
Remployers are not widely measured, except
KSAO requirements or preferences of
for education requirements. Data collected
by the Bureau of Labor Statistics
A
suggest a continued increase in demand for individuals with college degrees or
higher. The number of jobs requiring a bachelor’s degree is expected to increase
1 degree is expected to increase 19%, and
17%, the number requiring a master’s
the number requiring a doctoral degree
1 is expected to increase 22%. In contrast,
the number of jobs requiring only short-term on-the-job training is expected to
2 demand for education most likely reflects
increase by only 9%.6 The increasing
advances in technology that have made
3 many jobs more complex and technically
demanding.7
T
A very thorough and systematic source of information about KSAOs needed
for jobs is the Occupational OutlookSHandbook. It does not indicate KSAO deficiencies; rather, it provides detailed information about the nature of work and the
training and KSAOs required for the entire spectrum of occupations in the United
States. Surveys of HR professionals and employees consistently reveal that critical
thinking skills, creativity, diversity, ethics, and lifelong learning are seen as especially relevant skills for today’s employees.8
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Chapter Three
Planning
97
Labor Supply: The Labor Force and Its Trends
Quantity of labor supplied is measured and reported periodically by the Bureau of
Labor Statistics in the US Department of Labor. An example of basic results for
July 2002–2012 is given in Exhibit 3.3. It shows that the labor force, including both
full- and part-time employees, reached about 155 million individuals (employed
and unemployed) and that unemployment ranged from 4.6% to 9.6%. The data for
2009–2010 clearly show the effects of a major economic slowdown. The subseGis reflected by the decreased unemployment rate
quent gradual economic recovery
in 2012.
A
Data reveal several labor force trends that have particular relevance for staffing
T is slowing, going from an annual growth rate
organizations. Labor force growth
of around 2% in the early 1990sE
to a projected rate of 1% by the year 2018. There
are increasingly fewer new entrants to the labor force. This trend, coupled with the
S of the new entrants will have, creates major
severe KSAO deficiencies that many
,
adaptation problems for organizations.
Demographically, the labor force has become more diverse, and this trend will
continue. Data starting in the 1980s and projected through 2018 show a slow trend
D
toward nearly equal labor force participation
for men and women, a slight decrease
in the proportion of whites in the
workforce,
and large proportional growth in the
E
representation of Hispanics and Asians. There will also be a dramatic shift toward
fewer younger workers and moreAworkers over the age of 55.
Other, more subtle labor forceNtrends are also under way. There has been a slight
upward movement overall in theDaverage number of hours that people work and
a strong rise in the proportion of employees who work very long hours in certain
R
A
Exhibit 3.3
Labor Force Statistics
1
1
218
2
145 3
136 T
8.4
S
67
2002
Civilian noninstitutional population
(in millions)
Civilian labor force (in millions)
Employed (in millions)
Unemployed (in millions)
Labor force participation rate (%)
Unemployment rate (%)
5.8
2004
2006
2008
2010
2012
223
229
234
238
243
147
140
8.1
66
5.5
152
145
7.0
66
4.6
155
147
8.9
63
5.8
154
139
14.8
65
9.6
155
142
12.5
64
8.1
Source: US Department of Labor, “The Employment Situation,” July 2002, July 2004, July 2006, July
2008, July 2010, July 2012.
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Support Activities
Part Two
occupations, such as managers and professionals. Relatedly, there is an increase in
holding multiple jobs, with 6.2% of employed people holding more than one job.
The number of immigrants in the population is growing; nearly 1 in 10 people is
foreign born, the highest rate in more than 50 years. New federal and state policies are increasingly pushing welfare recipients into the labor force, and they are
mostly employed in low-wage jobs with low educational requirements. People historically out of the labor force mainstream—such as those with disabilities and the
growing number of retirees—may assume
G a greater presence in the labor force.9
A
Labor Supply: KSAOs Available
T that 40% of employers indicated that high
A survey of 431 HR professionals found
school graduates lack basic skills inEreading comprehension, writing, and math
required for e ntry-level jobs, and that 70% of employers said high school graduS
ates are deficient in work habits such as professionalism, critical thinking, personal
, 10 Most respondents believed college graduaccountability, and time management.
ates were somewhat better prepared for work, but 44% of applicants with college
degrees were still rated as having poor writing skills. There are also shortages
D required in contemporary manufacturing
of employees with the high skill levels
11
environments. Economists and sociologists
are quick to note that these skills
E
shortages are being reported despite consistent gains in standardized test scores
A
and educational attainment in the labor force since the 1960s.12 Thus, it appears the
Nskills is increasing, as we noted earlier, not
problem is that demand for advanced
that the supply of skilled workers is decreasing.
This idea is reinforced by another
D
survey of 726 HR professionals which found 98% of respondents reported that the
competition for talented workers has R
increased in recent years.13 Data such as these
reinforce the serious KSAO deficiencies
A reported by employers in at least some
portions of the labor force.
Labor Shortages and Surpluses 1
When labor demand exceeds labor supply
1 for a given pay rate, the labor market is
said to be “tight” and the organization experiences labor shortages. Shortages tend
2
to be job or occupation specific. Low unemployment rates, surges in labor demand
3
in certain occupations, and skill deficiencies
fuel labor quantity and labor quality
shortages for many organizations. The
shortages
cause numerous responses:
T
•
•
•
•
•
•
0077862414_ch03_p089_150.indd 98
Increased pay and benefit packages
S
Hiring bonuses and stock options
Alternative work arrangements to attract and retain older workers
Use of temporary employees
Recruitment of immigrants
Lower hiring standards
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Chapter Three
Planning
99
• Partnerships with high schools, technical schools, and colleges
• Increased mandatory overtime work
• Increased hours of operation
These types of responses are lessened or reversed when the labor market is
“loose,” meaning there are labor surpluses relative to labor demand.
Employment Arrangements
G
Though labor market forces bring organizations and job seekers together, the specific nature of the employment A
arrangement can assume many forms. One form
is whether the person will be employed
full time or part time. Data show that
T
about 83% of people work full time and 17% work part time.14 Although many
E
people prefer p art-time work, approximately
23% of p art-time workers are seeking
full-time employment.
S
A second arrangement involves
, the issue of flexible scheduling and shift work.
The proportion of the workforce covered by flexible shifts has steadily grown from
12.4% in 1985 to 27.5% in 2004. Many of these workers are covered by formal
flextime programs. Work hours are
D often put into shifts, and about 15% of f ull-time
employed adults work evening, night, or rotating shifts.15
E often considered in combination, are (1) variTwo other types of arrangements,
ous alternative arrangements toA
the traditional employer–employee relationship,
and (2) the use of contingent employees.
Alternative arrangements include the
N
organization filling its staffing needs through the use of independent contractors,
Dtemporary help agency employees, and employon-call workers and day laborers,
ees provided by a contract firm R
that provides a specific service (e.g., accounting).
Contingent employees do not have an explicit or implicit contract for long-term
A
employment; they expect their employment
to be temporary rather than long term.
National data on the use of alternative employment arrangements and contingent
employees were gathered by the1US Bureau of Labor Statistics in 2005. It found
that 89.3% of surveyed individuals worked in a traditional employer–employee
1 of these individuals (97.1%) considered themarrangement, and the vast majority
selves noncontingent. The most2prevalent alternative was to work as an independent contractor (7.5%), followed by on-call employees and day laborers (1.7%),
3 (.9%), and employees provided by a contract
temporary help agency employees
firm (.6%). The percentage of contingent
employees in these alternative arrangeT
ments ranged from 3.4% (independent
contractors)
to 60.7% (temporary help
S
employees). Unfortunately, there has not been a data collection effort on the use of
alternative employment arrangements since 2005, but most indicators suggest that
alternative employment arrangements have increased over time.
Exhibit 3.4 shows several other workforce trends identified in a survey of
1,247 HR professionals. The cost of health care has long been an issue identified
in this survey, which is conducted every two years. The aging workforce has also
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Part Two
EXHIBIT 3.4
Support Activities
Major Workforce Trends
• Continuing high cost of health care in the United States
• Increased global competition for jobs, markets, and talent
• Growing complexity of legal compliance for employers
• Large numbers of baby boomers leaving the workforce at around the same time
• Economic growth of emerging markets
• Greater need for cross-cultural understanding G
in business settings
A
Source: J. Schramm, Workplace Forecast, 2011 (Alexandria,
T VA: Society for Human Resource
Management, 2011).
E
S
,
been an issue of note. More recent surveys
focus on global issues such as international competition for talent as well as the economic growth of emerging markets.
D
E
Changes in technology can influence the staffing planning process significantly.
In some cases, technology can serveA
as a substitute for labor by either eliminating
or dramatically reducing the need for
N certain types of workers. The economy as
a whole has shown decreased demand for positions like clerical workers, teleD
phone operators, and manufacturing operators as technology has replaced labor
R changes in software that have made comas an input to production. Ironically,
puters easier for nonspecialists to use
A have eliminated many jobs in computer
Technology
programming.
At the same time, technology can serve to create new jobs as new business
opportunities emerge. In place of the
1 jobs that are eliminated, demand for technical occupations like robotics engineers, systems and database analysts, and
1
software engineers has increased. The expansion of e‑commerce and other
2 demand for those who design and manage
Internet-based services has increased
websites. Increasing productivity as 3
a result of technological change can also spur
increased firm performance, which in turn will create more jobs. Often these new
T set of KSAOs than previous jobs, meanjobs will require a completely different
ing that increased staffing resourcesSwill have to be devoted to either retraining
or replacing the current workforce. Research conducted in both the United States
and Germany shows that computerization has led to an increase in the demand
for highly educated specialists, leading to an overall increased market demand for
skills in science and mathematics, which has led to dramatic increases in wages
for individuals with these skills.16 Employers that adopt new technology for any
aspect of their operations will also have to consider how to tap into labor markets
that have these skills.
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101
Human Resource Planning
After a solid understanding of the internal and external environments has been
acquired, a more detailed set of plans to address organizational needs in light
of these environmental influences can be considered. Human resource planning
(HRP) is a process and set of activities undertaken to forecast an organization’s
labor demand (requirements) and internal labor supply (availabilities), to compare
these projections to determine employment
gaps, and to develop action plans for
G
addressing these gaps. Action plans include planning to arrive at desired staffing
A
levels and staffing quality.
A general model depicting the
T process of HRP is presented first, followed by
an operational example of HRP. Detailed discussions of the major components of
E
HRP are then given.17
S
,
Process and Example
The basic elements of virtually any organization’s HRP are shown in Exhibit 3.5.
As can be seen, the HRP process involves four sequential steps:
D
1. Determine future HR requirements
E
2. Determine future HR availabilities
3. Reconcile requirements andAavailabilities—that is, determine gaps (shortages
and surpluses) between theNtwo
4. Develop action plans to close
D the projected gaps
An example of HRP, including
Rresults from forecasting requirements and availabilities, is shown in Exhibit 3.6. The exhibit shows a partial HRP conducted by
A (sales and customer service). It involves only
an organization for a specific unit
two job categories (sales [A] and customer service [B]) and two hierarchical levels
1
1
Exhibit 3.5 The Basic Elements of Human
2 Resource Planning
3
T
(1) Forecast Labor Requirements
S
Compare
(3) Determine
Gaps
(4) Develop
Action
Plans
(2) Forecast Labor Availabilities
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Exhibit 3.6
G
A
T
E
S
,
Operational Format and Example of Human Resource Planning
D
E
Forecast for Workforce—
A One Year
Requirements
Availabilities
N
110
71
D
R
15
22
A
Organizational Unit: Sales and Customer Service
Job Category
and Level
A1 (Sales)
A2 (Sales manager)
B1 (Customer service
representative)
B2 (Customer service
manager)
Current
Workforce
100
20
200
Reconciliation
and Gaps
39 (shortage)
7 (surplus)
250
140
110 (shortage)
15
25
1
22
3 (shortage)
335
400
255
145 (shortage)
1
2
3
T
S
Action Planning
Recruitment
Selection
Employment
Retention
Compensation
Training and
development
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Chapter Three
Planning
103
for each category (entry level [1] and managerial level [2]). All of the HRP steps
are confined to this particular organizational unit and its job categories/levels, as
shown.
The current workforce size (number of employees) is given for each job category/
level. Requirements and availabilities are predicted for one year, and the results are
shown in the relevant columns. After the reconciliation process, final gap figures
are agreed on and entered into the gap column.
These gap data serve as the G
basic input to action planning. Because the gaps
show both shortages and a surplus, and because the gaps vary in severity relative
A action plan will probably have to be develto the current workforce, a specific
oped and implemented for each job
T category/level. The resulting four staffing (and
other) plans should bring staffing
E into an orderly balance of requirements and
availabilities over the course of the planning period.
S identify and illustrate the rudiments of HRP.
The above process and example
Within them are several distinct ,components that require elaboration. We turn now
to these components, emphasizing that each one represents a factor that must be
considered in HRP and that specific choices must be made regarding the operational details for each component.
D
E
A
Before HRP per se can be undertaken,
several critical decisions must be made.
N
These decisions will shape the nature of the resultant HRP process, and they will
D namely, the gap estimates. The quality and
influence the output of the process,
potential effectiveness of the action
R plans developed from the gap estimates are
thus at stake when these initial decisions are confronted and made.
A
Initial Decisions
Strategic Planning
We have already discussed the 1
need to integrate organizational strategy into the
HRP process. In addition, the development of a strategy for HR should also be the
1 decisions should be made before more concrete
first element of HRP. Several key
plans are considered.18 First, a vision
2 based on the overall organizational strategy
should be developed. This often3means deciding what values and core competencies all members of the organization should possess, and considering principles
T
that will support these. Second, potential
strategies for achieving planning process
goals should be discussed. It is best
at
this
point to think of whole systems of goals
S
(e.g., integrate all KSAO information for the workforce and future planning needs)
rather than specific concrete goals (e.g., conduct recruiting at a local college campus). Too much focus on implementation details early in the strategic planning
process can lead to a patchwork approach that involves elements that do not fit
together well. Third, contingency plans should be developed and considered. For
example, what happens if certain key employees leave the organization? What happens if there is a change in the economy that reduces the supply of needed KSAOs
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in the labor market? Use of simulation software that shows potential future outcomes for a variety of actions and responses is one way to evaluate the likelihood
of potential worst-case scenarios and plan for how to respond should they arise.
Fourth, methods for obtaining feedback relative to goals and objectives should
be in place. This is a crucial stage, as it involves specifying the types of data that
will be used to determine whether the planning process is successful or whether
changes need to be made.
HRP can be performed on a plan-bG
asis, project-basis, or population-basis. When
HRP takes place as an integral part of an organization’s strategic planning process,
A is a wise approach because it helps inteit is referred to as plan-based HRP. This
grate the organization’s strategic planning
T process with HR implications. However,
not all important business developments
E are captured in formal business plans, particularly if they occur rapidly or unexpectedly. Organizational responses to these
S projects, rather than in changes to the
changes that occur in the form of special
total business plan, are referred to as,p roject-based HRP. In addition, many organizations do HRP outside the formal planning cycle for critical groups of employees
on a regular basis. This often occurs for jobs in which there are perennial shortages
of employees. Planning focused onD
a specific employee group is referred to as
population-based HRP.
E
A
Planning Time Frame
Since planning involves looking intoNthe future, the logical question for an organization to ask is, How far into the future should our planning extend? Typically,
D
plans are divided into long term (three years and more), intermediate (one to three
R Organizations vary in their planning time
years), or short term (one year or less).
frame, often depending on which of A
the three types of HRP is being undertaken.
For plan-based HRP, the time frame will be the same as that of the business
plan. In most organizations, this is between three and five years for so-called strategic planning and something less than
1 three years for operational planning. Planning horizons for project-based HRP vary depending on the nature of the projects
1
involved. Solving a temporary shortage of, say, salespeople for the introduction of
2 for only a few months, whereas planning
a new product might involve planning
for the s tart-up of a new facility could
3 involve a lead time of two or more years.
Population-based HRP will have varying time frames, depending on the time necessary for labor supply (internal as T
well as external) to become available. As an
an organization, the planning time frame will
example, for top-level executives in S
be lengthy.
Job Categories and Levels
The unit of HRP and analysis is composed of job categories and hierarchical levels
among jobs. These job category/level combinations, and the types and paths of
employee movement among them, form the structure of an internal labor market.
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Management must choose which job categories and hierarchical levels to use for
HRP. In Exhibit 3.6, for example, the choice involves two jobs (sales and customer
service) and two levels (entry and managerial) for a particular organizational unit.
Job categories are created and used on the basis of the unit of analysis for which
projected shortages and surpluses are being investigated. Hierarchical levels should
be chosen so that they are consistent with or identical to the formal organizational
hierarchy. The reason for this is that these formal levels define employee promotions (up levels), transfers (across
G levels), and demotions (down levels). Having
gap information by level facilitates planning of internal movement programs
within the internal labor market.AFor example, it is difficult to have a systematic
promotion-from-within programTwithout knowing probable numbers of vacancies
and gaps at various organizational
E levels.
S
Head Count (Current Workforce)
The basic unit of analysis for workforce
planning is not the number of employ,
ees needed. Rather, to account for the amount of scheduled time worked by each
employee, staffing needs are stated in terms of full-time equivalents (FTEs). To
determine FTEs, simply define D
what constitutes f ull-time work in terms of hours
per week (or other time unit) andEcount each employee in terms of scheduled hours
worked relative to a full workweek. If full time is defined as 40 hours per week, a
person who normally works 20 A
hours per week is counted as a .50 FTE, a person
normally working 30 hours per week
N is a .75 FTE, and so on. It is also often advisable to take current authorized vacancies into account when assessing head count.
D
Roles and Responsibilities R
Both line managers and staff specialists
(usually from the HR department) become
A
involved in HRP, so the roles and responsibilities of each must be determined as
part of HRP. Most organizations take the position that line managers are ultimately
1 quality of HRP, but the usual practice is to have
responsible for the completion and
HR staff assist with the process.1 As noted previously, in an ideal situation there
will be a constant flow of information among those involved in HRP, with line
managers indicating how needs2are expected to change, and HR staff describing
the KSAO resources within and3outside the organization that can be used to meet
these needs in the future.
T
The process begins with line staff evaluating their current capabilities and future
S the organization. The HR staff then takes the
needs based on strategic plans for
lead in proposing which types of HRP will be undertaken and when, and in making suggestions with regard to comprehensiveness, planning time frame, and job
categories and levels. Final decisions on these matters are usually the prerogative
of line management. Once an approach has been decided on, task forces of both
line managers and HR staff are assembled to design an appropriate forecasting and
action planning process and to do any other preliminary work.
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Once these processes are in place, the HR staff typically assumes responsibility
for collecting, manipulating, and presenting the necessary data to line management and for laying out alternative action plans (including staffing plans). Action
planning usually becomes a joint venture between line managers and HR staff,
particularly as they gain experience with, and trust for, one another.
Forecasting HR Requirements
G
Forecasting HR requirements is a direct derivative of business and organizational
A
planning. As such, it becomes a reflection
of projections about a variety of factors, such as sales, production, technological
change,
productivity improvement, and
T
the regulatory environment. Many specific techniques may be used to forecast HR
E or judgmental in nature, and they are usually
requirements; these are either statistical
tailor-made by the organization. In forecasting
future needs, it is essential to conS
sider not just the status of the workforce but also the expected changes in needs due
to strategic considerations. F
orward-t,hinking HR experts note that data can inform
HRP when it comes to prior needs and trends, but effective planning also entails con19
sidering how changes in the internal and
D external environments will alter forecasts.
E
Statistical Techniques
A are available for use in HR forecasting.
A wide array of statistical techniques
Prominent among these are regression
Nanalysis, ratio analysis, trend analysis, time
series analysis, and stochastic analysis. Brief descriptions of three of these techD
niques are given in Exhibit 3.7.
The use of integrated workforce R
planning software, which can be combined
with data from other organizational databases, has made it easier to use these staA As we noted earlier, HR practitioners are
tistical techniques than it was in the past.
also increasingly expected to support their proposals and plans with hard data. The
three techniques shown in Exhibit 3.7
1 have different strengths and weaknesses, as
we will see. We present these approaches in order from those requiring the least
data collection to those requiring the1most.
Trend analysis is the simplest approach,
because it uses data only on previous
2
staffing levels over time to predict future needs. Trend analysis is useful when
3
organizations have data mostly on historical
staffing levels with less detailed information on specific predictors. The decomposition
of data into specific time periods
T
of demand is often used in health careSand retail settings, where staffing levels vary
greatly over the course of a year or even at different times of the day.
The trend analysis approach implicitly assumes that the pattern of staffing needs
in the past will be predictive of the future but does not take any external factors,
like the overall state of the economy or product market demand, into account.
Ratio analysis is a more sophisticated approach that uses data from prior sales
figures or other operational data to predict expected head count. In the example in
Exhibit 3.7, estimates of sales growth are used to predict how many employees will
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Exhibit 3.7 Examples of Statistical Techniques to Forecast HR Requirements
(A) Trend Analysis
1. Gather data on staffing levels over time and arrange in a spreadsheet
with one column for employment levels and another column for time.
2. Predict trend in employee demand by fitting a line to trends in historical
staffing levels over time (this can
G be done by using regression or graphical
methods in most spreadsheet programs).
Aby dividing each period’s demand by
3. Calculate period demand index
the average annual demand. T
Example: January demand
E index = Avg. January FTE/Avg. annual FTE
4. Multiply the previous year’s FTEs by the trend figure, then multiply this
S
figure by the period’s demand index.
Example: A retail store, finds that the average number of employees
over the past five years has been 142, 146, 150, 155, and 160. This
represents a consistent 3% increase per year; to predict the next year’s
D
average demand, multiply 160 by 1.03 to show a 3% expected
increase. Over this same
E time period, it averaged 150 FTEs per month,
with an average of 200 FTEs in December. This means the December
A
demand index is 200/150 = 1.33, so its estimate for next year’s
Nwill be (160 × 1.03) × 1.3 = 219 FTEs.
December FTE demand
D
Examine historical ratios involving
R workforce size.
$ sales
No. of new customers
A
Example:
?
(B) Ratio Analysis
1.
1.0 FTE
1.0 FTE
?
2. Assume ratio will be true in future.
1
3. Use ratio to predict future HR requirements.
Example:
$40,0001sales
is past ratio
1.0 2
FTE
(b) Sales forecast is $4,000,000
3
(c) HR requirements
100 FTEs
(a)
T
Statistically identify historical predictors
of workforce size.
S
(C) Regression Analysis
1.
Example:
FTEs
a
b1 sales
b2 new customers
2. Only use equations with predictors found to be statistically significant.
3. Predict future HR requirements, using equation.
Example:
0077862414_ch03_p089_150.indd 107
(a) FTEs
7
.0004 sales
.02 new customers
(b) Projected sales
$1,000,000
Projected new customers
300
(c) HR requirements
7
400
6
413
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be needed. This technique is useful for incorporating data from other functional
areas to predict the future. However, this model cannot directly account for any
changes in technology or skill sets that might change these ratios.
The regression analysis technique can be used with historical predictors and can
make more statistically precise estimates of future expectations by taking several
factors into account simultaneously. In the example, sales data and new customer
data from organizational records are used to predict staffing needs in the past. Then
the estimates from these predictions are
G combined with projections for the future to
generate future FTE requirements. This procedure is more thorough than the ratio
A only a single predictor of workforce size.
analysis approach, which incorporates
However, collecting enough data to T
make good estimates can be time-consuming
and requires judgment calls.
E
S
Judgmental Techniques
Judgmental techniques represent human
, decision-making models that are used for
forecasting HR requirements. Unlike statistical techniques, judgmental techniques
use a decision maker who collects and weighs the information subjectively and then
D The decision maker’s forecasts may or
turns it into forecasts of HR requirements.
may not agree very closely with those
E derived from statistical techniques. This is
not necessarily a weakness of either approach. Ideally, the precision of statistical
techniques should be coupled with o A
n-the-ground knowledge represented by judgmental techniques to provide estimates
N that have both rigor and relevance.
Implementation of judgmental forecasting can proceed from either a top-down
D
or bottom-up approach. In the former, top managers of the organization, organiR knowledge of business and organizational
zational units, or functions rely on their
plans to predict what future head counts
A should be. At times, these projections
may, in fact, be dictates rather than estimates, necessitated by strict adherence to
the business plan. Such dictates are common in organizations undergoing significant change, such as restructuring, mergers,
and cost-cutting actions.
1
In the bottom-up approach, lower-level managers make initial estimates for their
1
unit (e.g., department, office, or plant) on the basis of what they have been told or
2
presume are the business and organizational
plans. These estimates are then consolidated and aggregated upward through
successively
higher levels of management.
3
Then, top management establishes the HR requirements in terms of numbers.
T
S
Scenario Planning
Scenario planning is a technique that has been explored in a variety of fields to
predict future outcomes in an uncertain environment.20 The previous methods we
have described are all designed to give a specific estimate for the number of people
who will be needed in the organization in the future. Scenario planning provides a
range of estimates based on various possible changes in the external and internal
environments. For example, ratio analysis uses forecasts of future product demand
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to predict how many FTEs will be required; in our example in Exhibit 3.7, 100 FTEs
will be required based on sales forecasts. Scenario planning provides a range of
possible FTE requirements based on a variety of potential product demand levels;
thus, three distinct estimates of FTE requirements will be developed for worst-case,
expected, and best-case demand levels.
The advantage of scenario planning is that it allows HRP to incorporate uncertainty and prepare for the unexpected. Because it explicitly acknowledges ways that
the future might be different from
G the past, it also incorporates judgmental techniques. Considering all the complex factors that go into various scenarios is often
A is often part of the process. These programs
challenging, so simulation software
allow managers to change various
T features of a situation to see how an outcome (in
this case, projected FTEs) will change.
E Evidence suggests that the process of doing
scenario planning can change the ways decision makers think by promoting more
holistic views of a problem that S
incorporate a wide range of factors.21
,
Forecasting HR Availabilities
D given for the current workforce and their availIn Exhibit 3.6, head-count data are
ability as forecast in each job category/level.
These forecasted figures take into
E
account movement into and out of each job category/level and exit from the orgaA Described below are three approaches for forenizational unit or the organization.
casting availabilities: manager judgment,
Markov Analysis, and replacement and
N
succession planning.
D
R
Manager Judgment
Individual managers may use their
A judgment to make availability forecasts for their
work units. This is especially appropriate in smaller organizations or in ones that
lack centralized workforce internal mobility data and statistical forecasting capabili1Exhibit 3.6, assume the manager is asked to make
ties. Continuing the example from
an availability forecast for the entry
1 sales job category A1. The template to follow
for making the forecast and the results of the forecast are shown in Exhibit 3.8. To the
current staffing level in A1 (100)2is added likely inflows to A1 (10), and then likely
outflows from A1 (37) are subtracted
to yield the forecasted staffing availability
3
(73). Determining the inflow and outflow numbers requires judgmental estimates
T
as to the numbers of promotions, transfers, demotions, and exits. As shown at the
S involve an upward change of job level within or
bottom of Exhibit 3.8, promotions
between job categories, transfers are lateral moves at the same job level across job
categories, and demotions are downward changes of job level within or between job
categories. Separate forecasts may be done for the other job category/levels (A2,
B1, and B2).
To provide reliable estimates, the manager must be very knowledgeable about
both organizational business plans and individual employee plans or preferences for
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Exhibit 3.8
Support Activities
Manager Forecast of Future HR Availabilities
Job Category/Level: Sales (A1)
Time 1
Inflows
Current
Staffing
Level 100
Promotion 0
Transfer 9
Demotion 1
Outflows
Promotion 10
Transfer 15
GDemotion 0
AExit 12
Time 2
Forecasted
Staffing
Avail. 73
T
E
Note: Promotion is A1 to A2, A1 to B2, B1 to B2, or B1 to A2; transfer is A1 to B1, A2 to B2, B1 to A1,
or B2 to A2; demotion is A2 to A1, A2 to B1, B2 to B1,Sor B2 to A1.
,
staying in their current job versus moving
to another job. Knowledge of business
plans will be helpful in judging the likely internal mobility opportunities for employees. Business expansion, for example,Dwill likely mean expanding internal mobility
opportunities. Knowledge of employee plans or preferences will help pinpoint which
employees are likely to change jobs orEleave the work unit or organization.
The estimated staffing availabilityA
(n = 73) in Exhibit 3.8 coincides closely with
the availability estimate (n = 71) derived from forecasting based on Markov Analysis results, discussed below. This isN
intentional. Markov Analysis uses historical
mobility data and probabilities to forecast
future availabilities, while managers’
D
judgment uses current knowledge of
business
and employees’ plans to forecast
R
employee movements person by person. Results from these two approaches to
A coincide, but they can be quite close if the
availability forecasts will not necessarily
manager is knowledgeable about past mobility patterns, employee mobility intentions, and mobility opportunities.
1 judgment to forecast availabilities is that
A major problem with using manager
the manager may lack the necessary1business plan and employee intention information to provide solid estimates, as opposed to casual guesstimates. In addition,
2
if there are large numbers of employees and job category/levels in the work unit,
3 task may overwhelm the manager. Markov
the sheer complexity of the forecasting
Analysis presents a way out of thisTdilemma, since it substitutes historical data
about internal mobility and exit rates for the manager’s judgment as a basis for
S
making availability forecasts, and it simultaneously
considers all types of possible
employee movement in the forecasts.
Markov Analysis
Markov Analysis is used to predict availabilities on the basis of historical patterns of job stability and movement among employees. Consider again the four
job category/levels (A1, A2, B1, and B2) in the sales and customer service unit in
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Exhibit 3.6. Note that between any two time periods, the following possibilities
exist for each employee in the internal labor market:
1. Job stability (remain in A1, A2, B1, or B2)
2. Promotion (move to a higher level: A1 to A2, A1 to B2, B1 to B2, or B1
to A2)
3. Transfer (move at the same level: A1 to B1, B1 to A1, A2 to B2, or B2 to A2)
4. Demotion (move to a lowerGlevel: A2 to A1, A2 to B1, B2 to B1, or B2 to A1)
5. Exit (move to another organizational unit or leave the organization)
A
These possibilities may be thought
T of in terms of flows and rates of flow or movement rates. Past flows and rates may be measured and then used to forecast the future
Ebased on assumptions about the extent to which
availability of current employees,
past rates will continue unchanged
S in the future. For example, if it is known that the
historical promotion rate from A1 to A2 is .10 (10% of A1 employees are promoted
,
to A2), we might predict that A1 will experience a 10% loss of employees due to
promotion to A2 over the relevant time period. To conduct Markov Analysis we must
know all of the job stability, promotion,
D transfer, demotion, and exit rates for an internal labor market before we can forecast future availabilities.
E are shown in Exhibit 3.9 for the organizaThe elements of Markov Analysis
tional unit originally presented in
A Exhibit 3.6. Refer first to part A of Exhibit 3.9,
where movement rates between two time periods (T and T+1) are calculated
N
for four job category/level combinations. This is accomplished as follows. For
D number of employees at time period T, and
each job category/level, take the
use this number as the denominator
for calculating job stability and moveR
ment rates. Next, for each of these employees, determine which job category/
level they were employed in atAT+1. Then, sum up the number of employees
in each job category/level at T+1, and use these as the numerators for calculating stability and movement rates. Finally, divide each numerator separately by
1
the denominator. The result is the stability and movement rates expressed as
1
proportions, also known as transition
probabilities. The rates for any row (job
category/level) must add up to 2
1.0.
For example, consider job category/level A1. Assume that at time T in the past,
3 that at T+1, 240 of these employees were still
A1 had 400 people. Further assume
in A1, 40 had been promoted toTA2, 80 had been transferred to B1, 0 had been
promoted to B2, and 40 had exited the organizational unit or the organization. The
S
resulting transition probabilities, shown in the row for A1, are .60, .10, .20, .00, and
.10. Note that these rates sum to 1.00.
By referring to these figures, and the remainder of the transition probabilities in
the matrix, an organization can begin to understand the workings of the unit’s internal labor market. For example, it becomes clear that 60%–80% of employees experienced job stability and that exit rates varied considerably, ranging from 10% to 35%.
Promotions occurred only within job categories (A1 to A2, B1 to B2), not between
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Exhibit 3.9 Use of Markov Analysis to Forecast Availabilities
A. Transition Probability Matrix
Job Category and Level
T
B.
T
1
A1
A2
B1
B2
Exit
A1
A2
B1
B2
.60
.05
.05
.00
.10
.60
.00
.00
.20
.00
.60
.00
.00
.00
.05
.80
.10
.35
.30
.20
Forecast of Availabilities
Current
Workforce
A1
100
A2
20
B1
200
B2
15
60
1
10
0
10
12
0
0
20
0
120
0
0
0
10
12
22
140
22
71
G
A
T
E
S
,
D
E
A
job categories (A1 to B2, B1 to A2). Transfers
were confined to the lower of the two
levels (A1 to B1, B1 to A1). Only occasionally
did demotions occur, and only within
N
a job category (A2 to A1). Presumably, these stability and movement rates reflect
D
specific staffing policies and procedures that were in place between T and T+1.
With these historical transitional R
probabilities, it becomes possible to forecast
the future availability of the current A
workforce over the same time interval, T and
T+1, assuming that the historical rates will be repeated over the time interval and that
staffing policies and procedures will not change. Refer now to part B of Exhibit 3.9.
To forecast availabilities, simply take1the current workforce column and multiply it
by the transition probability matrix shown in part A. The resulting availability figures
1
(note these are the same as those shown in Exhibit 3.6) appear at the bottom of the
2 and B2 = 22. The remainder of the current
columns: A1 = 71, A2 = 22, B1 = 140,
workforce (80) is forecast to exit and3will not be available at T+1.
Limitations of Markov Analysis. T
Markov Analysis is an extremely useful way
to capture the underlying workings S
of an internal labor market and then use the
results to forecast future HR availabilities. It is, however, subject to some limitations that must be kept in mind.22
The first and most fundamental limitation is that of sample size, or the number
of current workforce employees in each job category/level. As a rule, it is desirable
to have 20 or more employees in each job category/level. Since this number serves
as the denominator in the calculation of transition probabilities, with small sample
sizes there can be substantial differences in the values of transition probabilities,
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even though the numerators used in their calculation are not that different (e.g.,
2/10 = .20 and 4/10 = .40). Thus, transition probabilities based on small samples
yield unstable estimates of future availabilities.
A second limitation of Markov Analysis is that it does not detect multiple moves
by employees between T and T+1; it only classifies employees and counts their
movement according to their beginning (T) and ending (T+1) job category/level,
ignoring any intermittent moves. To minimize the number of undetected multiple
moves, therefore, it is necessaryGto keep the time interval relatively short, preferably no more than two years.
A third limitation pertains toAthe job category/level combinations created to
serve as the unit of analysis. These
T must be meaningful to the organization for
the HRP purposes of both forecasting
E and action planning. Thus, extremely broad
categories (e.g., managers or researchers) and categories without any level designations should be avoided. NoteS
that this recommendation may conflict somewhat
with organizations with a non-bureaucratic
or team-based structure.
,
Finally, the transition probabilities reflect only gross, average employee movement and not the underlying causes of the movement. Stated differently, all employees in a job category/level are assumed
to have an equal probability of movement.
D
This is unrealistic because organizations
take many factors into account (e.g.,
E
seniority, performance appraisal results, and KSAOs) when making movement
A of these factors, the probabilities of movedecisions about employees. Because
ment may vary among specific employees.
N
Individual Internal ForecastsD
RMarkov Analysis approaches are designed to estiBoth the managerial judgment and
mate future internal HR availabilities
A for large numbers of employees. Replacement
and succession planning focus on identifying individual employees who will be considered for promotion, along with a thorough assessment of their current capabilities
and deficiencies, coupled with training
and development plans to erase any defi1
ciencies. Through replacement and succession planning, the organization constructs
1
internal talent pipelines that ensure steady and known flows of qualified employees
to higher levels of responsibility2and impact. Replacement planning precedes succession planning, and the organization
3 may choose to stop at just replacement planning rather than proceeding into the more complex succession planning process.23
Replacement and successionTplanning can occur at any and all levels of the
organization. They are most widely
S used at the management level, starting with
the chief executive officer and extending downward to the other officers or top
managers. They can also be used throughout the entire management team, including the identification and preparation of individuals for promotion into entry-level
management. They may also be used for linchpin positions—ones that are critical
to organization effectiveness (such as senior scientists in the research and development function of a technology-driven organization) but not necessarily housed
within the management structure.
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Replacement Planning. Replacement planning focuses on identifying individual employees who will be considered for promotion and thoroughly assessing their current capabilities and deficiencies. Training and development plans
to improve the fit between capabilities and requirements are also developed. The
focus is thus on both the quantity and the quality of availability. The results of
replacement planning are shown on a replacement chart, an example of which is
shown in Exhibit 3.10. The chart is based on the previous sales–customer service
unit in Exhibit 3.6. The focus is onG
replacement planning for the sales manager
(A2) from the ranks of sales associates (A1) as part of the organization’s “grow
A strategy. The top part of the chart indicates
your own,” p romotion-from-within HR
T by replacement planning, as well as the
the organizational unit and jobs covered
minimum criteria for promotion eligibility.
E The next part shows the actual replacement chart information for the incumbent department manager (Woo) and the two
S Stemke) in the menswear department at the
eligible sales associates (Williams and
Cloverdale store. The key data are length
of service, overall performance rating,
,
and promotability rating. When the incumbent sales manager (Woo) is promoted to
group sales manager, both sales associates will be in the promotion pool. Williams
will likely get the position because ofDher “ready now” promotability rating. Given
his relatively short length of serviceE
and readiness for promotion in less than one
year, Stemke is probably considered a “star” or a “fast tracker” whom the organizaA replacement charts could be developed
tion will want to promote rapidly. Similar
for all departments in the store and for
N all hierarchical levels up to and including
store manager. Replacement chart data could then be aggregated across stores to
D availability.
provide a corporate composite of talent
R has been greatly accelerated by human
The process of replacement planning
resources information systems (HRISs).
A Many HRISs make it possible to keep
data on KSAOs for each employee based on job history, training, and outside
education. Software also allows organizations to create lists of employees who
are ready to move into specific positions,
1 and to assess potential risks that managers or leaders will leave the organization. The ability to keep track of employees
1 inventories of skill sets means that staffing
across the organization by standardized
2
managers will be able to compare a variety
of individuals for new job assignments
quickly and consistently. A large database
of candidates also makes it possible
3
to seek out passive internal job candidates who are not actively looking for job
changes but might be willing to takeTnew positions if offered. Many organizations
that use integrated database systemsSto track candidates across a variety of locations report they are able to consider a larger pool of candidates than they would
with a paper-based system. Some HRISs automatically alert HR when key positions become open, and thus the process of finding a replacement can get under
way quickly. The development of comprehensive replacement planning software
is typically quite expensive, with costs reaching hundreds of thousands of dollars. The software is probably most useful for large organizations that are able
to capitalize on the costs of a large system. However, smaller organizations may
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0077862414_ch03_p089_150.indd 115
G
A
Organizational Unit: Merchandising—Soft Goods T
Replacement for: Department Sales Manager (A2)
E
Pipelines for Replacement: Department Sales (A1)—preferred; External Hire—last resort
Minimum Eligibility Requirements: Two years’ full-time
S sales experience; overall performance rating of “exceeds
expectations”; promotability rating of “ready now” or “ready in < 1 yr.”
,
Exhibit 3.10 Replacement Chart Example
Department: Menswear
Store: Cloverdale
Incumbent Manager
Seng Woo
Promote to
Group Sales Manager
Replacement
Shantara Williams
Sales Manager
Replacement
Promote to
8
1 expectations
X Exceeds
1
2
X Ready now
Ready in < 1 yr.
3
T
Years
S
in Job
Overall Performance Rating
Meets expectations
Not promotable
Below expectations
Promotability Rating
2
X Exceeds expectations
Ready in 1–2 yrs.
Meets expectations
Not promotable
Below expectations
Promotability Rating
Ready now
X Ready in < 1 yr.
Ready in 1–2 yrs.
Not promotable
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115
Sales Manager
Overall Performance Rating
Ready in 1–2 yrs.
Below expectations
Planning
Lars Stemke
Years
in Job
Meets expectations
Chapter Three
Promote to
D
E
Overall Performance
Rating
A expectations
X Exceeds
7
N
Promotability Rating
DReady in < 1 yr.
X Ready now
R
A
Years
in Job
116
Part Two
Support Activities
find it possible to create their own databases of skills as a means of facilitating the
internal replacement process.24
Succession Planning. Succession plans build on replacement plans and directly
tie into leadership development. The intent is to ensure that candidates for promotion
will have the specific KSAOs and general competencies required for success in the
new job. The key to succession planning is assessing each promotable employee for
KSAO or competency gaps, and where
G there are gaps, creating employee training
and development plans that will close the gap. A survey conducted by the Society for
A that over half of HR professionals indicated
Human Resource Management showed
that their organization had implemented
T some form of succession planning.25
Continuing the example from replacement
planning, Exhibit 3.11 shows a sucE
cession plan for the two promotable sales associates. The organization has develS
oped a set of general leadership competencies
for all managers, and for each
management position (such as department
sales
manager), it indicates which of
,
those competencies are required for promotion, in addition to the minimum eligibility requirements. It is the focus on these competencies, and the development
plans to instill them in candidates forDpromotion who lack them, that differentiates
replacement and succession planning.
E
It can be seen that Williams, who is “ready now,” has no leadership compeA of an in-house training course on budtency gaps, with the possible exception
get preparation and monitoring, which
N she is currently completing. Stemke, while
having “star” potential, must undertake development work. When he successfully
D
completes that work, he will be promoted
to sales manager as soon as possible.
Alternatively, he might be placed in the
R organization’s acceleration pool. This pool
contains high-potential individuals like
A Stemke from within the organization who
are being groomed for management positions generally, and for rapid acceleration
upward, rather than progressing through the normal promotion paths.
It should be noted that replacement
1 and succession planning require managers’ time and expertise to conduct, both of which the organization must be will1
ing to provide to those managers. Moreover,
there must be effective performance
appraisal and training and development
systems
in place to support replacement
2
and succession planning. For example,
3 overall performance and promotability ratings, plus assessment of competency gaps and spelling out development plans,
could occur annually as part of the T
performance appraisal process conducted by
management. In addition to identifying
S the skills needed immediately, succession
plans should also identify skills needed in the future. Finally, promotability and
development assessments require managers to make tough and honest decisions. A
study of successful succession management in several Fortune 500 organizations
concluded, “Succession management is possible only in an organizational culture
that encourages candor and risk taking at the executive level. It depends on a willingness to differentiate individual performance and a corporate culture in which
the truth is valued more than politeness.”26
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Chapter Three
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117
Exhibit 3.11 Succession Plan Example
Organizational Unit: Merchandising—Soft Goods
Department: Menswear
Position to Be Filled: Department Sales Manager (A2)
Leadership Competencies Required
• Plan work unit activities
• Budget preparation and monitoring G
• Performance management of sales associates
A
T
Eligible
Replacement
Promotability
Rating
Competency
E
Gaps
Development
Plans
S. Williams
Ready now
Budget prep
Now completing in-house training
course
L. Stemke
Ready in
< 1 year
Plan work
Shadowing sales manager
S
,
D
E
Budget prep
A
Perf. mgt.N
D
R
A
Starting in-house training course
Serving as sales manager 10 hours
per week
Taking course on performance
management at university extension
1
1
The reconciliation and gap determination
process is best examined by means of an
2 the example in Exhibit 3.6. Attention is now
example. Exhibit 3.12 presents intact
directed to the reconciliation and3gaps column. It represents the results of bringing
together requirements and availability forecasts with the results of external and
internal environmental scanning.TGap figures must be decided on and entered into
the column, and the likely reasons
S for the gaps need to be identified.
Reconciliation and Gaps
Let’s first consider job category/level A1. A relatively large shortage is projected due to a mild expansion in requirements coupled with a substantial drop in
availabilities. This drop is not due to an excessive exit rate but to losses through
promotions and job transfers (refer back to the availability forecast in Exhibit 3.9).
For A2, decreased requirements coupled with increased availabilities lead to a
projected surplus. Clearly, changes in current staffing policies and procedures will
have to be made to stem the availability tide, such as a slowdown in the promotion
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Exhibit 3.12
118
G
A
T
E
S
,
Operational Format and Example of Human Resource Planning
D
E
Forecast for Workforce—
A One Year
Requirements
Availabilities
N
110
71
D
R
15
22
A
Organizational Unit: Sales and Customer Service
Job Category
and Level
A1 (Sales)
A2 (Sales manager)
B1 (Customer service
representative)
B2 (Customer service
manager)
Current
Workforce
100
20
200
Reconciliation
and Gaps
39 (shortage)
7 (surplus)
250
140
110 (shortage)
15
25
1
22
3 (shortage)
335
400
255
145 (shortage)
1
2
3
T
S
Action Planning
Recruitment
Selection
Employment
Retention
Compensation
Training and
development
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Chapter Three
Planning
119
rate into A2 from A1, or to accelerate the exit rate, such as through an early retirement program.
Turning to B1, note that a huge shortage is forecast. This is due to a major surge
in requirements and a substantial reduction in availabilities. To meet the shortage,
the organization could increase the transfer of employees from A1. While this would
worsen the already-projected shortage in A1, it might be cost effective and would beef
up the external staffing for A1 to cover the exacerbated shortage. Alternately, a massive external staffing program could
G be developed and undertaken for B1 alone. Or,
a combination of internal transfers and external staffing for both A1 and B1 could be
A staffing becomes a candidate for consideration,
attempted. To the extent that external
this will naturally spill over into other
T HR activities, such as establishing starting-pay
levels for A1 and B1. Finally, aEvery different strategy would be to develop and
implement a major retention program for employees in customer service.
S shortage. This gap is so small, however, that
For B2 there is a small projected
for all practical purposes it can ,be ignored. The HRP process is too imprecise to
warrant concern over such small gap figures.
In short, the reconciliation and gap phase of HRP involves coming to grips with
projected gaps and the likely reasons
D for them. Quite naturally, thoughts about future
implications begin to creep into E
the process. Even in the simple example shown, it
can be seen that considerable action will have to be contemplated and undertaken
A for the organizational unit. That will involve
to respond to the forecasting results
mixtures of external and internalNstaffing, with compensation as another likely HR
ingredient. Through action planning, these possibilities become real.
Staffing Planning
D
R
A
After the HRP process is complete, it is time to move toward the development of
specific plans for staffing. This 1
is a vital phase of the planning process, in which
staffing objectives are developed and alternative staffing activities are generated.
The objectives are the targets the1organization establishes to determine how many
employees will be needed and in2 which job categories. The activities are the specific methods, including recruiting
3 and selection strategies, that will be used to
meet these objectives. We devote special attention in this section to one of the most
T planning: Should the organization use a core
critical decisions made during staffing
workforce or a flexible workforce,
S or should parts of the workforce be outsourced?
Staffing Planning Process
Staffing Objectives
Staffing objectives are derived from identified gaps between requirements and
availabilities. Thus, these objectives respond to both shortages and surpluses. They
may require the establishment of quantitative and qualitative targets.
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Quantitative targets should be expressed in head count or FTE form for each job
category/level and will be very close in magnitude to the identified gaps. Indeed,
to the extent that the organization believes in the gaps as forecast, the objectives
will be identical to the gap figures. A forecast shortage of 39 employees in A1,
for example, should be transformed into a staffing objective of 39 accessions (or
something close to it) to be achieved by the end of the forecasting time interval.
Exhibit 3.13 illustrates these points. For each cell, enter a positive number for
head-count additions and a negative G
number for head-count subtractions.
Qualitative staffing objectives refer to the qualities of people in KSAO-type
A these may be stated in terms of averages,
terms. For external staffing objectives,
such as average education level for new
T hires and average scores on ability tests.
Internal staffing objectives of a qualitative
nature may also be established. These
E
may reflect desired KSAOs in terms of seniority, performance appraisal record
S off-the-job training, and so forth.
over a period of years, types of on- and
The results of replacement and succession
planning, or something similar to
,
that, will be very useful to have as well.
Generating Alternative Staffing Activities
D
With quantitative and, possibly, qualitative
objectives established, it is necessary
E
to begin identifying possible ways of achieving them. At the beginning stages of
generating alternatives, it is not wiseA
to close the door prematurely on any of them.
Exhibit 3.14 provides a full range ofN
options for dealing with employee shortages
and surpluses. As with previous planning processes, the focus is not on specific
D
programs at this stage but rather on broad classes of potential activities.
As shown in the exhibit, both short-R
and l ong-term options for shortages, involving
a combination of staffing and workloadAmanagement, are possible. Short-term options
include utilizing current employees better (through more overtime, productivity
1
1
Exhibit 3.13 Setting Numerical Staffing Objectives
2
Job
3
Category
Objectives
T
and
New Hires Promotions
Level
Gap
S Transfers
A1
A2
B1
B2
– 39
+7
–110
–3
52
0
+140
+2
–6
+2
–5
+4
–3
–8
–3
–1
Demotions Exits
0
0
–2
0
–4
–1
–20
–2
Total
+ 39
–7
+110
+3
Note: The objective is to close each gap exactly.
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Chapter Three
Planning
121
Exhibit 3.14 Staffing Alternatives to Deal With Employee Shortages and Surpluses
Employee
shortage
Long-term
options
Recalls
Increase
overtime or
part time
Hires
G
A
T
Permanent
in-transfers
E
S
Increase ,
Increase
subcontracts
Short-term
options
productivity
D
Temporary E Temporary
assignments
A hires
N
D
R
Employee
surplus
A
Long-term
options
Freeze hires
and use
attrition
Permanent
out-transfers
Freeze hires
and use
attrition
Layoffs
Reduce
overtime or
part time
Excused
absences
0077862414_ch03_p089_150.indd 121
1
1
2Retirement
3incentives
T
S Transfer
work in
Temporary
assignments
Transfer
work out
Retrain
Buy back
vacation or
holidays
Transfer
work out
Short-term
options
Retrain
Transfer
work in
Reduce
workweek
Temporary
shutdown
or layoffs
Retrain
or
train
Accumulate
surplus
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increases, and buybacks of vacation and holidays), outsourcing work to other organizations (subcontracts, transferring work out), and acquiring additional employees
on a short-term basis (temporary hires and assignments). L
ong-term options include
staffing additional employees (recalling former employees, transferring in employees from other work units, adding new permanent hires), enhancing skills (retraining), and pushing work to other organizations (transferring work out).
Assessing and Choosing Alternatives
G
As should be apparent, a veritable smorgasbord of alternative staffing activities are
A of these alternatives needs to be assessed
available to address staffing gaps. Each
systematically to help decision makers
T choose from among them.
The goal of assessment is to identify
E one or more preferred activities. A preferred
activity offers the highest likelihood of attaining the staffing objective within the
S or at a tolerable cost, and with the fewest
time limit established, at the least cost
negative side effects. A wide variety, of metrics are available to assess potential
activities. First, a common set of assessment criteria (e.g., time for completion,
cost, and probability of success) should be identified and agreed on. Second, each
alternative should be assessed according
D to each of these criteria. In this way, all
alternatives will receive equal treatment,
E and tendencies to jump at an initial alternative will be minimized.
A
All of these alternatives must be considered
within the broader context of how
the organization creates and structures
its
workforce.
This involves the key straN
tegic issue of core versus flexible workforce usage. The choice should be considD philosophy, in particular, the difference
ered in light of the organization’s staffing
between an internal or external emphasis.
R Many of the staffing activity alternatives
are more applicable to one type of workforce
than another.
A
Core Workforce
1
A core workforce, defined as regular f ull-time and p art-time employees of the orga1
nization, forms the bulk of most organizations’
workforces. The key advantages of
a core workforce are stability, continuity,
and
predictability.
The organization can
2
depend on its core workforce and build strategic plans based on it. Several other
advantages accrue to the organization3from using a core workforce. The regularity
of the employment relationship fosters
T a sense of commitment and shared purpose
toward the organization’s mission. In addition, the organization maintains the legal
S
right to control employees working in its behalf, in terms of both work process and
expected results, rather than having to divide or share that right with organizations
providing a flexible workforce, such as temporary employment agencies. Finally,
the organization can directly control how it acquires its workforce and the qualifications of those it employs through the management of its own staffing systems.
By doing so, the organization may build not only a highly qualified workforce but
also one more likely to be retained, thus lessening pressure to continually restaff.
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Chapter Three
Planning
123
Several disadvantages of a core workforce exist. The implied permanence of the
employment relationship “locks in” the organization’s workforce, with a potential
loss of staffing flexibility to rapidly increase, reduce, or redeploy its workforce
in response to changing market conditions and project life cycles. Reducing the
core workforce, in particular, can be very costly in terms of severance pay packages, low morale, and damage to the organization’s reputation as a good employer.
Additionally, the labor costs of the core workforce may be greater than that of
the flexible workforce due to (1)Ghigher wages, salaries, and benefits for the core
workforce, and (2) the fixed nature of these labor costs, relative to the more variA workforce. By using a core workforce, the
able costs associated with a flexible
organization incurs numerous legal
T obligations—particularly taxation and employment law compliance—that could
E be fully or partially avoided through the use of
flexible workforce providers, which would be the actual employer. Finally, use of
a core workforce may deprive theSorganization of new technical and administrative
knowledge that could be infused,into it by use of flexible workers such as programmers and consultants.
Consideration of these numerous advantages and disadvantages needs to occur
separately for various jobs and organizational
units covered by the HR plan. In this
D
way, usage of a core workforce proceeds
along
selective, strategic lines. Referring
E
back to the original example in Exhibit 3.6, staffing planners should do a unique
core workforce analysis for theA
sales and customer service unit, and within that
unit, for both sales and customer
Nservice jobs at the entry and managerial levels.
The analysis may result in a decision to use only full-time core workers for the
managerial jobs, both full-time D
and part-time core workers for sales jobs, and a
combination of full-time core customer
service representatives augmented by both
R
full-time and part-time temporary
customer
service representatives during peak
A
sales periods. Once the job and work unit locations of the core workers have been
determined, specific staffing planning for effective acquisition must occur. This
involves planning of recruitment,
1 selection, and employment activities; these topics will be covered in subsequent chapters.
1
2
Flexible Workforce
The two major components of 3
the flexible workforce are temporary employees
provided by a staffing firm and independent
contractors. Planning for usage of the
T
flexible workforce must occur in tandem with core workforce planning; hence, it
S
should begin with a review of the advantages and disadvantages of a flexible workforce.27 The key advantage is staffing flexibility. The flexible workforce may be
used for adjusting staffing levels quickly in response to changing technological or
consumer demand conditions and to ebbs and flows of orders for products and services. Other flexibility advantages are the ability to quickly staff new areas or projects and the ability to fill in for core workers absent due to illness, vacations, and
holidays. Relative to the core workforce, the flexible workforce may also present
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labor cost advantages in the form of lower pay and benefits, more variable labor
costs, and reduced training costs. It should be noted, however, that the temporary
workforce provider shoulders many of these costs and simply passes them on to
the organization through the fees it charges for its services. Another advantage
for the organization is possibly being relieved of many tax and employment law
obligations, since flexible workers are often not considered employees of the organization. For temporary employees, however, the organization may be considered
a co-employer subject to some legal G
obligations, especially pertaining to EEO. An
emerging advantage is that the flexible workforce, especially in the professional
A source of new knowledge about organiand technical ranks, may be an important
zational best practices and new skillsTnot present in the core workforce, especially
“hot skills” in high market demand. In
E a related vein, organizations use temporary
or interim top executives to fill in until a permanent hire is found and on board,
Sprojects requiring their expertise.28 Finally,
to spur change, and to launch special
usage of a flexible workforce relieves
, the organization of the need to design and
manage its own staffing systems, since this is done by the flexible workforce provider. An added advantage here is that the organization might use flexible workers
on a tryout basis, much like a probationary
D period, and then hire into its core workforce those who turn out to be a solidEperson/job match. Many temporary workers
are “temp-to-perm,” meaning that the organization will hire them permanently if
A
they perform successfully in the temporary
role. Such an arrangement is usually
negotiated up front with the staffing N
services company.
These numerous advantages must be weighed against several potential disadvantages. Most important is the legalD
loss of control over flexible workers because
they are not employees of the organization.
Thus, although the organization has
R
great flexibility in initial job assignments
for
flexible workers, it is very limited in
A
the amount of supervision and performance management it can conduct for them.
Exacerbating the situation, frictions between core and flexible workers may also
arise. Core workers, for example, may
1 feel that flexible workers lack knowledge
and experience, are just “putting in time,” receive the easy job assignments, and do
not act like committed team players.1Also, flexible workers may lack familiarity
with equipment, policies, procedures,
2 and important customers; such deficiencies
may be compounded by a lack of training
in specific job requirements. Finally, it
3
should be remembered that the quality of the flexible workforce depends heavily on the quality of the staffing andTtraining systems used by the provider of the
flexible workers. The organization may
S end up with flexible but poorly qualified
workers.
If the review of advantages and disadvantages of flexible workers confirms the
strategic choice to use them in staffing, plans must be developed for the organization units and jobs in which they will be used, and for how they will be acquired.
Acquisition plans normally involve the use of staffing firms and independent contractors, both of which perform the traditional staffing activities for the organization. Hence, in contrast to the substantial and sustained staffing planning that must
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125
occur for the core workforce, planning for the flexible workforce is primarily a
matter of becoming knowledgeable about potential sources and lining them up in
advance of when they will be needed.
Staffing Firms
Recall that staffing firms (also called temporary help agencies) are the legal
employers of the workers being supplied, though matters of co-employment may
G
arise. Hence, the staffing firm conducts
recruitment, selection, training, compensation, performance appraisal, andAretention activities for the flexible workers. The
firm is also responsible for on-site supervision and management, as well as all
T required insurance premiums. For such serpayrolling and the payment of legally
E
vices, the firm charges the organization
a general fee for its labor costs (wages and
benefits) plus a markup percentage
of
labor costs (usually 40%–50%) to cover
S
these services’ costs plus provide a profit. There may be additional charges for
, as extra testing or background checks, or skill
specially provided services, such
training. Temp-to-perm workers may be hired away from the firm (with its permission and for a special fee) by the organization to become regular employees in the
Dthe firm may provide an o n-site manager to help
core workforce. For larger clients
the organization plan its specificEstaffing needs, supervise and appraise the performance of the temporary workers,
Ahandle discipline and complaints, and facilitate
firm–organization relations. With such additional staffing services, the firm functions increasingly like a staffingN
partner rather than just a staffing supplier.
Use of a staffing firm requiresDadvanced planning, rather than a panicky phone
call to a firm at the moment of staffing need. In addition to becoming aware of
firms that might be accessed, it isRwise to become familiar with their characteristics
and services. Shown in Exhibit A
3.15 are the various factors and issues to become
knowledgeable about for any firm.
When the organization chooses a firm, both parties should enter into a formal
1 should cover such matters as specific services
written agreement. The agreement
to be provided, costs, steps to ensure
1 that the flexible workers are employees of the
firm (such as having an on-site manager for them), and the process for terminat2
ing the firm–organization relationship.
It is best to have legal counsel prepare and
3
review the agreement.
The organization may decideTto establish its own in-house staffing firm. When
this is done, the employees of the firm may even be employees of the organization. Managers thus have readilySavailable flexible workers to whom they can turn,
without having to go through all the planning steps mentioned above.
Independent Contractors
An independent contractor (IC) provides specific task and project assistance to
the organization, such as maintenance, bookkeeping, advertising, programming,
and consulting. The IC can be a single individual (self-employed, freelancer) or an
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Exhibit 3.15 Factors to Consider When Choosing a Staffing Firm
Factor Issues
Agency and Its Reputation How long in business; location; references from clients
available.
Types of Workers Provided
What occupation and KSAO levels; how many available.
Planning and Lead Time Does agency help client plan staffing levels and needs; how
G be provided.
quickly can workers
Services Provided
A
Recruitment What methods are used; how targeted and truthful is
T
recruitment process.
Selection
What selection techniques
are used to assess KSAOs.
E
Training What types of training, if any, are provided before workers
S
are placed with client.
Wages and Benefits
How are wages ,determined; what benefits are provided.
Orientation How does the agency prepare workers for assignment with
client; does agency have an employee handbook for its
D
workers.
Supervision How does agency
E supervise its workers on site of client;
does agency provide on-site manager.
A client to hire its temporary workers as
Temp-to-Perm Does agency allow
permanent employees.
N
Client Satisfaction How does agency attempt to gauge client satisfaction with
Dcosts.
services, workers,
Worker Effectiveness
R
Punctuality and Attendance Does the agency monitor these; what is its record with
previous clients.A
Job Performance
Is it evaluated; how are the results used.
Retention How long do workers remain on an assignment voluntarily;
how are workers1discharged by the agency.
Cost
1
Markup What is the percentage over base wage charged to client
2
(often it is 50% to cover benefits, overhead, profit margin).
3 extra beyond the markup (e.g., temp-
For Special Services What services cost
to-perm); what are those costs.
T
S
employer with its own employees. Neither the IC nor its employees are intended
to be employees of the organization utilizing the IC’s services, and care should be
taken to ensure that the IC is not treated as an employee (see Chapter 2).29
As with staffing firms, the organization must take the initiative to identify and
check out ICs for possible use in advance of when they are actually needed. It is
desirable to solicit and examine references from past or current clients of the IC. In
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127
addition, as much as possible the organization should seek to determine how the IC
staffs, trains, and compensates its employees. This could occur during a preliminary meeting with the IC. In these ways, the organization will have cultivated and
screened ICs prior to when they are actually needed.
Outsourcing
Outsourcing of work functions can
G be defined as the transfer of a business process
to an external organization. This is a more drastic step than simply using ICs or temA
porary employees. The primary difference is that when processes are outsourced,
T a completely finished product from the external
the organization expects to receive
source. This means the organization
E does not direct or control the way in which
work is performed; rather, it only receives the end result of the work. Within the
S norm for organizations to completely outsource
HR department, it has become the
payroll tasks, meaning that data from
, the organization are sent to a third-party vendor that assesses taxes and withholdings and takes care of either directly depositing
or sending out paychecks for employees.30
Organizations outsource for D
a variety of reasons. An obvious reason for outsourcing of manufacturing and E
routine information-processing tasks is the availability of less expensive labor in the global market. Often, specialized vendors can
achieve economies of scale for A
routine tasks that are performed across a variety
of organizations. Organizations N
also outsource functions that have highly cyclical
demand so that they do not have to make major capital outlays and go through the
D
cost of hiring and training permanent workers to perform tasks that may not be
R organizations outsource functions that require
needed in the future. Sometimes
specific expertise that cannot beAeconomically generated in-house. Smaller organizations that require legal services, for example, often choose to hire an external
law firm rather than establish their own pool of legal specialists. As we have noted,
many organizations also outsource
1 routine business functions, such as having
third-party vendors take care of payroll or benefits administration tasks.
1
One variant of outsourcing is termed “offshoring,” which means that products
or services are provided by an 2
external source outside of the country where the
31
organization’s core operations take
3 place. The outsourcing of manufacturing to
lower-wage countries has a long history, and this practice is likely to continue
T
unabated. For example, in the computer
industry it is common for large companies
to have many subcomponent electronic
parts
manufactured by third-party vendors
S
overseas, with final assembly of products performed domestically. Many companies have outsourced routine computer programming and telephone help services
to third-party providers in India because of the availability of a highly skilled labor
force that typically draws only a fraction of the wages paid in North America.
Offshoring is no longer limited to blue- and pink-collar jobs. There has been a
dramatic increase in offshoring white-collar technical and professional work in the
twenty-first century, fueled by improvements in global education, an increasingly
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128
Part Two
Support Activities
positive climate for business in China and India, and increased demand for products and services in multinational organizations.
The decision to outsource is likely to be controversial.32 Outsourcing is usually done for activities that have low added value for the organization. Normal
transactional or procedural work that is easily replicated is likely to be outsourced.
High-value-added operations that are core to the organization’s business strategy
almost certainly should not be outsourced. Although most managers are aware
that it is unwise to outsource work that
G is fundamental to a business’s core operations, there are still many cases where organizations discover, too late, that they
A done internally. Additionally, offshoring
outsourced work that should have been
has been the focus of media and political
T scrutiny. Extremely low wages and dangerous working conditions provided E
by external partners in foreign countries have
created a backlash against certain companies that have offshored manufacturing
S conditions in overseas “sweatshops” has
jobs. Negative press about poor working
been especially prominent in the clothing
industry. When outsourcing, an organi,
zation needs to make certain that it is not losing too much control over its major
work processes. Just because a business process has been outsourced does not
mean that the organization has lost the
D responsibility (and this sometimes includes
legal liability) for the actions of external
E partners.
A
N
Diversity Planning
D
Diversity programs arise out of a recognition that the labor force i...
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