The second step of the hr planning process involves an analysis of future organizational or personal capabilities. Capabilities include the skill level of employees, productivity rates and a number of employees, etc. In the past, more emphasis was on predicting the number of employees of human resource supply the company was likely to have in the future. Organisations may use varieties of procedures to estimate the supply. These procedures are general categories as either quantitative which use mathematical or statistical procedures or qualitative which use subjective judgment approaches.
The quantitative procedure generally uses past information about job categories and the number of people retiring, being terminated, leaving the organization voluntarily and being promoted. One of the most well known quantitative procedures is the Markov analysis. This technique uses historical rates of promotion, transfer, and turnover to estimate future availabilities in the workforce. Based on the past abilities, one can estimate the number of employees who will be in various positions within the organization in the future. Qualitative or judgemental approaches are much more popular in forecasting human resource supplies. Among the most frequently used methods are replacement planning, succession planning, and vacancy analysis. Replacement planning evolves an assessment of potential candidates to replace existing executives and other top-level managers as they retire or leave for other organizations. Succession planning is similar to replacement planning, except that it is a more long-term and developmentally oriented. Finally, vacancy analysis is much like the Markov analysis, except that it is based on managerial judgments of the probabilities. If knowledgeable experts provide estimates, vacancy analysis may be quite accurate.
In recent years, organizations have become concerned with a broader range of issues of future capabilities. For example, organizations have begun to estimate their future production levels. Towards this end, benchmarking is a technique that has become popular. Benchmarking involves comprising an organization’s human resource practices and programmes to other organizations.
Although benchmarking often focuses on an organization’s competitors, best practices benchmarking focuses on the programmes and policies used by an outstanding organization. For example, Federal express, leadership evaluation system, employee survey programme and total quality management efforts are frequently studied by other organizations because of their reputations.
In this step, the organization must determine what is human resource needs will be in the future. This includes the number of employees that will be needed, the types of skills that will be required. Productivity rates needed to complete successfully. There are methods for examining the future number of employees; also several procedures are there for predicting the number of employees needed in the future. This is referred to as the human resource demand two basic approaches or estimating human resource demand are qualitative and quantitative methods.
Two quantitative techniques for estimating human resource demand are:
- Ratio analysis
- Regression analysis
Involves comparing the number of employees to some index of workload. If your organization was planning its future training and development (T&D) staffing demand in five years, you could estimate the number of employees likely to be employed by the company in five years. And then use this ratio to determine the number of T&D employees needed in given years. For example, if your company was expecting to have 5,000 employees in five years, this ratio would suggest that around 21 T&D employees would be needed.
Relies on factors or predictors that determine the demand for employees, such as revenues, the degree of automation, and so forth. Information on these predictors from past years, as well as the number of workers employees in each of these years, is used to produce an equation or formula. The organization can then enter expected figures for the predictors, such as revenues and degree of automation into the formula to obtain an estimated number of employees needed in future years.