What Is Human Resource Planning (HRP)?

Posted: June 6th, 2021

What Is Human Resource Planning (HRP)?
Human resource planning (HRP) is the continuous process of systematic planning to achieve optimum use of an organization’s most valuable asset—quality employees. Human resources planning ensures the best fit between employees and jobs while avoiding manpower shortages or surpluses.

There are four key steps to the HRP process. They include analyzing present labor supply, forecasting labor demand, balancing projected labor demand with supply, and supporting organizational goals. HRP is an important investment for any business as it allows companies to remain both productive and profitable.

KEY TAKEAWAYS
Human resource planning (HRP) is a strategy used by a company to maintain a steady stream of skilled employees while avoiding employee shortages or surpluses.
Having a good HRP strategy in place can mean productivity and profitability for a company.
There are four general steps in the HRP process: identifying the current supply of employees, determining the future of the workforce, balancing between labor supply and demand, and developing plans that support the company’s goals.
0 seconds of 1 minute, 29 secondsVolume 75%
Human Resource Planning What Is Human Resource Planning (HRP) Used For?
Human resource planning allows companies to plan ahead so they can maintain a steady supply of skilled employees. The process is used to help companies evaluate their needs and to plan ahead to meet those needs.

Human resource planning needs to be flexible enough to meet short-term staffing challenges while adapting to changing conditions in the business environment over the longer term. HRP starts by assessing and auditing the current capacity of human resources.

Here, identifying a company’s skill set and targeting the skills a company needs enables it to strategically reach business goals and be equipped for future challenges. To remain competitive, businesses may need advanced skills or to upskill their employees as the market environment evolves and changes.

To retain employees and remain competitive, HRP often looks at organizational design, employee motivation, succession planning, and increasing return on investment overall.

Challenges of Human Resource Planning (HRP)
The challenges to HRP include forces that are always changing. These include employees getting sick, getting promoted, going on vacation, or leaving for another job. HRP ensures there is the best fit between workers and jobs, avoiding shortages and surpluses in the employee pool.

To help prevent future roadblocks and satisfy their objectives, HR managers have to make plans to do the following:

Find and attract skilled employees.
Select, train, and reward the best candidates.
Cope with absences and deal with conflicts.
Promote employees or let some of them go.
Investing in HRP is one of the most important decisions a company can make. After all, a company is only as good as its employees, and a high level of employee engagement can be essential for a company’s success. If a company has the best employees and the best practices in place, it can mean the difference between sluggishness and productivity, helping to lead a company to profitability.

What Are the Four Steps to Human Resource Planning (HRP)?
There are four general, broad steps involved in the human resource planning process. Each step needs to be taken in sequence in order to arrive at the end goal, which is to develop a strategy that enables the company to successfully find and retain enough qualified employees to meet the company’s needs.

Analyzing labor supply
The first step of human resource planning is to identify the company’s current human resources supply. In this step, the HR department studies the strength of the organization based on the number of employees, their skills, qualifications, positions, benefits, and performance levels.

Forecasting labor demand
The second step requires the company to outline the future of its workforce. Here, the HR department can consider certain issues like promotions, retirements, layoffs, and transfers—anything that factors into the future needs of a company. The HR department can also look at external conditions impacting labor demand, such as new technology that might increase or decrease the need for workers.

Balancing labor demand with supply
The third step in the HRP process is forecasting the employment demand. HR creates a gap analysis that lays out specific needs to narrow the supply of the company’s labor versus future demand. This analysis will often generate a series of questions, such as:

Should employees learn new skills?
Does the company need more managers?
Do all employees play to their strengths in their current roles?
Developing and implementing a plan
The answers to questions from the gap analysis help HR determine how to proceed, which is the final phase of the HRP process. HR must now take practical steps to integrate its plan with the rest of the company. The department needs a budget, the ability to implement the plan, and a collaborative effort with all departments to execute that plan.

Common HR policies put in place after this fourth step may include policies regarding vacation, holidays, sick days, overtime compensation, and termination.

What Is the Goal of Human Resource Planning (HRP)?
The goal of HR planning is to have the optimal number of staff to make the most money for the company. Because the goals and strategies of a company change over time, human resource planning must adapt accordingly. Additionally, as globalization increases, HR departments will face the need to implement new practices to accommodate government labor regulations that vary from country to country.

The increased use of remote workers by many corporations will also impact human resource planning and will require HR departments to use new methods and tools to recruit, train, and retain workers.

Why Is Human Resource Planning Important?
Human resource planning (HRP) allows a business to better maintain and target the right kind of talent to employ—having the right technical and soft skills to optimize their function within the company. It also allows managers to better train the workforce and help them develop the required skills.

What Is “Hard” vs. “Soft” Human Resource Planning?
Hard HRP evaluates various quantitative metrics to ensure that the right number of the right sort of people are available when needed by the company. Soft HRP focuses more on finding employees with the right corporate culture, motivation, and attitude. Often these are used in tandem.1

What Are the Basic Steps in HRP?
HRP begins with an analysis of the available labor pool from which a company can draw. It then evaluates the firm’s present and future demand for various types of labor and attempts to match that demand with the supply of job applicants.1

The Bottom Line
Quality employees are a company’s most valuable asset. Human resource planning involves the development of strategies to ensure that a business has an adequate supply of employees to meet its needs and can avoid either a surplus or a lack of workers.

There are four general steps in developing such a strategy: first, analyzing the company’s current labor supply; second, determining the company’s future labor needs; third, balancing the company’s labor needs with its supply of employees; and fourth, developing and implementing the HR plan throughout the organization.

A solid HRP strategy can help a company be both productive and profitable.

Human resource planning (HRP) is a critical component of strategic management that helps organizations effectively manage their workforce to achieve business goals (Cascio & Boudreau, 2016). As you noted, the key steps in HRP involve analyzing current labor supply, forecasting future demand, balancing projections, and developing supportive plans (DeCenzo & Robbins, 2018).
Recent research has emphasized the importance of integrating HRP with other strategic initiatives. For example, HRP should be aligned with financial planning to ensure labor costs are optimized over time (Bratton & Gold, 2017). It also must account for changing workplace demographics and skills needed to support technological innovations (Stone & Deadrick, 2015).
Additionally, effective HRP requires flexibility to respond to external uncertainties. The COVID-19 pandemic disrupted many industries and highlighted the need for contingency workforce planning (Gurtoo & Ara, 2020). Geopolitical events like wars or trade disputes can also impact the availability of critical talent pools (Festing & Paludi, 2018).
In summary, human resource planning is a dynamic process that helps organizations proactively address their current and future human capital requirements. With careful analysis, forecasting, and adaptive planning, HRP can support business strategy and maximize organizational performance. Please let me know if you need any clarification or have additional questions.