By Matylda Rabczenko
Guest Writer, Warwick Business School
In current times of uncertainty, HR planning is commonly associated with bureaucratic rigidity that is inapplicable to the rapidly changing modern world, where reliance on past statistics gives us little scope to make future forecasts.
But contrary to this widely shared dogma, today’s fast-paced firms need a degree of HR planning if they want their workforces to keep up with the unstable market demands. This has been supported by research from the past decade, which confirms that HR planning continues to make important contributions to the better monitoring of staffing costs and employee numbers, as well as to the maintenance of a workforce profile, which allows for better-informed resourcing decisions.
Broadly speaking, once implemented, HR planning can result in one of 2 forecasts: labor shortages, or labor surpluses. A majority of Western companies will endure the latter due to the recession. However, unlike the Western world, the Philippines have not experienced the effects of the recent financial slump. Instead, the economy is undergoing incredible growth, largely due to heavy foreign direct investment, which has been fuelling cohorts of new ventures. Consequentially, there is a high demand for labor, which is widely available, however rarely skilled. On occasion, this may result in skilled-labor shortages, in which case the employers must resort to: employee overtime, employee outsourcing, or employee retention schemes.
In order to prevent such desperate measures, companies employ HR planning to predict both internal and external labor demand on a constant basis. This way, strategies to tackle employee shortage or surplus can be planned before the problem even arises, thus preventing the labor shortage or surplus from happening, or at least ameliorating the company’s approach.
When analyzing internal demand, there are 5 questions that need to be asked:
1. Is employee turnover high or low? High employee turnover can be an indicator of upcoming labor shortages. On the other hand, low employee turnover may imply the success of retention strategies, meaning that the company will not experience labor shortages.
2. What do the ‘employee movements’ say? How many employees have changed positions to ones within or outside of the company, and why? Employers often use replacement charts, succession plans, or transition matrices in order to track this.
3. How high is employee productivity? If employee productivity is not high enough to fulfill quotas, then this implies labor shortages.
4. Is the organizational performance on the rise or fall? When organizational performance is falling, then the company is likely to experience labor surpluses, as profits fall short of wages.
5. What is the company’s strategic direction? In cases where the company intends on broadening its scope of activities, the expected outcome would be labor shortages.
Analyzing external demand is much more tricky, as this may involve an endless number of factors. The questions below highlight some of the most important issues that should be considered:
– Are there enough unemployed and qualified individuals to satisfy the company’s resourcing needs?
– What are the general levels of unemployment and within relevant occupations?
– What types of skills are available in the area? As mentioned earlier, the question of skills is especially pertinent to the Philippines, where skilled-labor shortages are more likely to occur than in the Western world.
– What are the industry trends?
– What are the government’s legal frameworks?
These questions alone should give you a better idea of your business’s future recruitment challenges. They should also give you an idea of the importance of properly applied HR planning. Perhaps, it’s time to give it a shot!