Human Resource Planning (HL IB Business Management)

• The human resources (employees) of a business need to be managed
• Effective human resource management is important because:
  • It ensures that the organisation has the right people in the right roles, with the right support and opportunities to succeed
  • It also helps create a positive work environment
• This will lead to higher productivity, improved efficiency and a competitive advantage

Diagram: The benefits of effective human resource management 

Effective human resource management can provide a competitive advantage

Staff as an asset and a cost

• Staff are an asset to a business as they bring knowledge, skills, and expertise to the business
  • Staff can increase productivity, drive innovation and enhance customer service - all of which contribute to the success and profitability of the business
  • Staff can help to build a positive reputation for the business through their interactions with customers, suppliers, and other stakeholders
     
• Staff also generate costs for a business, and for many businesses, staffing costs are one of the largest costs they have. These costs include:
  • Hiring and training workers
  • Managing workers as managers have to be hired
  • Paying the salaries and wages staff
  • Additional benefits, such as company cars, pensions, healthcare, etc
  • Letting workers go often requires (redundancy payments)
    

• Human resource planning focuses on identifying how many and what kind of employees are needed
  • It looks at how employees will be
    • Recruited and deployed (used)
    • Developed and trained
    • Motivated, managed and led
       
• Staff costs can make up a large proportion of a businesses costs
  • Careful planning and objective monitoring of employee performance is a key element of effective financial and operational control
     

Human Resources Metrics that are Useful to a Business

Human Resource Metric	Explanation
Labour Productivity	Labour productivity is a measure of output per employee over a specified period of time   Businesses aim to increase the level of labour productivity to improve competitiveness
Labour Turnover	Labour turnover measures the proportion of employees leaving a business during a specific time period   High levels of labour turnover can indicate poor motivation, ineffective recruitment procedures or attractive alternative opportunities for workers
Labour Retention	Labour retention measures the proportion of employees remaining with a business during a specific time period   High levels of labour retention can indicate effective motivation and recruitment procedures or few alternative employment opportunities for workers
Absenteeism	The absenteeism rate is a measure of the proportion of staff absent from work during a specific period of time (e.g. a day, week or month)   High levels of absenteeism can cause problems Sick pay and the hiring of temporary staff to cover for those absent increases costs Output is likely to be temporarily reduced  Other staff may become demotivated if they have to cover for absent workers

• There are factors inside and outside of the business which can impact on the human resources planning process

Factors Within a Business which may Impact Human Resources Planning

Factor	Explanation
Business objectives & strategy	The business's goals, objectives, and long-term plans influence the required workforce skills, competencies and size E.g. Entering a new market may require changes to be made to the number and type of employees required UK cafe chain Prêt à Manger plans to double the size of its business by expanding into five new markets which will require the recruitment of at least 3,000 Team Members and Baristas by the end of 2023
Financial situation	Budget constraints may influence decisions related to hiring, training, pay and benefits Businesses in financial difficulty may struggle to offer attractive packages to attract employees To raise their salary offer, they may have to reduce spending on training and development Alphabet plans to make significant savings as a result of slowing sales growth by reducing its global workforce by 12,000 and changing how often equipment - such as laptops used by workers - is replaced
Organisational structure	The structure of the organisation including its hierarchy, reporting relationships and departmental divisions Changes in the organisational structure may require changes to workforce planning such as redeployment, redundancy or additional recruitment For example, Consumer goods company Unilever announced its intention in January 2022 to cut 1,500 jobs as part of a restructure of its global operations
Labour relations	The relationship between managers and workers, and whether workers are members of trade unions can have a significant impact upon the workforce planning process Where worker organisation is strong, human resources are more likely to meet the demands of employees with regards to pay and conditions In 2022 unionised workers at the Port of Felixstowe who had engaged in a series of disruptive strikes were rewarded with a pay increase of 15.5 per cent over two years Where there is little or no worker organisation, human resources are likely to have more flexibility over these changes
Organisational culture	The organisational culture may include a strong work life balance resulting in a higher likelihood that additional workers will be recruited when the demand is there A recent study by TalentLMS of U.S. tech industry employees revealed that 45% of employees who experience a toxic work environment plan to quit their job because of it

• A range of factors beyond the control of a business can also impact the human resources planning process
   

External factors that affect human resources planning 

Economic conditions

• The state of the economy, including factors such as economic growth, inflation, and unemployment rates
  • During periods of economic growth a business may need to focus on attracting and retaining staff to meet increased demand
  • During economic downturns they may need to implement cost-cutting measures such as redundancies or hiring freezes

Labour market

• The supply of suitable employees and the impact of factors such as skills shortages, labour mobility and immigration
  
  
  • Spain recently changed its migration laws to recruit more foreigners from overseas for industries with labour shortages and its primary focus for 2023 is to hire carpenters, plumbers, electricians and other workers involved in construction

Technological advancements

• Rapid technological change can disrupt industries and job roles, affecting HR planning
  • Automation, artificial intelligence (AI), and other emerging technologies can lead to changes in job requirements, skills needed and workforce composition
  • HR planning must anticipate these shifts and consider re-skilling or up-skilling to meet future workforce needs

Legal and regulatory environment

• Laws and regulations related to employment, labour relations, health and safety, immigration
  • In 2021 changes to employment law in Greece provided workers with the right to flexibility to the eight-hour working day where employees are allowed to work up to 10 hours on one day and fewer on another or take time off as well as the right to not have to respond to emails after hours
    

Social and cultural factors

• Social and cultural factors such as societal values and demographic trends
  • Workforce diversity and inclusion, flexible work arrangements, work-life balance and employee wellbeing are examples of areas where social and cultural factors are external factors that influence workforce planning
  • French laws recognise the custom for a long lunch break and provides for five weeks paid time off for employees as well as protecting the a limit of a 35 hour working week - companies can’t force employees to work overtime  and if they do they’re well-compensated for it
    

Political factors

• Changes in government policies, political stability and geopolitical factors
  • Shifts in labour laws, changing tax regulations and immigration policies and cross-border trade agreements are often political focuses which can impact human resources planning
    
    
  • Australia is currently experiencing a national skills shortage in a number of occupations and its governments plan to fill this gap with a combination of training local Australians and recruiting immigrants - current in-demand skills include construction, civil engineering and nursing
    

Industry-specific factors

• Different industries may face unique external factors
  • Healthcare organisations need to consider factors such as changing regulations, demographic shifts, and advancements in medical technology

Competitive landscape

• The environment in which a business competes for labour and the actions and strategies of competitors influence workforce planning
  • HR planning should consider the organisation's position in the market and align recruitment strategies so that the pay and benefits reflect that
  • In the UK businesses recruiting hospitality, health and social care workers and professional services staff and are starting to seek talent outside traditional sources by focusing on candidates’ skills and potential rather than qualifications and industry experience to widen the pool of candidates