Factors Affecting Human Resource Planning (HRP)

There are various factors, both internal and external, which affect HR planning.

These factors are as follows:

1. Type of Organization

Type of organization affects HR planning. Type of organization may be identified on two base nature of business and pattern of ownership. Nature of business of the organization determines its production/operations process which affects ratio of operatives and supervisory and managerial personnel.

For example, this ratio tends to be different in a manufacturing organization as compared to a service organization. On the basis of pattern of ownership, organizations may be put into two categories organizations which make decisions on their own and organizations whose decision making is affected by other entities.

Organizations which make decisions on their own enjoy considerable freedom in HR planning. Organizations whose decision making is influenced by other entities have considerable restriction in HR planning because these entities provide guidelines about how HR planning should be undertake, for example, public sector organizations, subsidiaries of multinationals, etc.

2. Approach of Organization towards Planning

Approach towards HR planning in an organization depends on its approach towards overall organizational planning. Different organizations adopt different approaches towards overall planning. These approaches may be analyzed in two forms- proactive or reactive approach and formal or informal approach. In proactive approach, an organization anticipates future environment and makes strategic decisions based on this anticipation.

In reactive approach, strategic decisions are in the form of reactions to environmental changes. Since an organization collects information for undertaking planning process and relevant part of this information is also used in HR planning process, HR planning may be either proactive or reactive.

Similarly, if an organization undertakes overall planning on formal basis which is quite comprehensive, HR planning tends to be comprehensive. As against this, if an organization undertakes overall planning on informal basis which is fragmented, HR planning also tends to be fragmented and only a few HR issues are considered in HR planning.

3. Strategy of Organization

Strategy of an organization considerably affects HR planning because an HR plan is derived from strategy of the organization. An organization has different strategic option- stability, growth, and retrenchment. In stability strategy, the focus is on incremental growth by making the existing facilities more productive. In this case, emphasis in HR planning is more on developing existing personnel and making few adjustments of personnel.

In growth strategy, the emphasis is on making additional investments which requires additional personnel. Therefore, the organization needs comprehensive HR plans. In retrenchment strategy, the focus is on reducing business volume by reducing scale of business operations or divesting some businesses. Therefore, HR planning puts emphasis on reducing number of personnel.

4. Organizational Growth Cycle

Organizations have a definite pattern of growth cycle birth and infancy, adulthood, maturity, and old age. At each stage of growth cycle, there are specific organizational objectives and strategic focus, consequently, HR planning. At birth and infancy, organizational objectives are survival and growth to some extent; strategic focus is on mobilizing resources (including human resources too) and defining products and markets; and focus of HR planning is on mobilizing human resources.

At adulthood, organizational objectives are quantitative growth of business volume and qualitative growth through product differentiation and creating niche; strategic focus is on increasing market share, product innovation, and reaping rewards of previous and present efforts; focus of HR planning is on developing individual, group, and organizational competency.

At maturity, organizational objectives are stabilization of business and contribution to social cause; strategic focus is on maintaining organizational position with stability; focus of HR planning is just to continue the pattern of previous stage. At old age, organizational objective is survival; strategic focus is on retrenching products/businesses that are not rewarding; focus of HR planning is on pruning size of workforce.

This is a general pattern of organizational growth cycle. There is no fixed time frame for completion of each stage. This depends how an organization is managed. For example, Tata Steel, formed in 1907, is still going strong while many organizations formed during this period have become extinct long back.

5. Level of Environmental Uncertainty

Environment is dynamic and changes continuously. Rate of this change determines level of environmental uncertainty. If rate of change is high, level of environmental uncertainty is high and the HR planning premises on the basis of which an HR plan is formulated may not work.

Therefore, there is a need for formulating contingency HR plans. This ensures that if one HR plan is not suitable in the changed situation, other HR plans are available. If the level of environmental uncertainty is low, only one HR plan is sufficient.

6. Time Horizon

Time horizon of HR plans affects HR planning. Longer the time horizon higher is the uncertainty in HR formulation. This is so because it is very difficult, sometimes even impossible if the environment changes on irregular pattern, to forecast future environment precisely.

Therefore, HR plans for remote future become meaningless. Because of this limitation, most of the organizations prepare HR plans for five years along with short- terms HR plans every year. In this case, short-term HR plans are based on long-term HR plan. In order to make long-term HR plan flexible, many organizations prepare yearly HR plan and recast long-term HR plan every year.

7. Type and Quality of Information

Quality of HR planning is based on the type and quality of information because formulation of HR plan is based on information. If required type of information with high quality is available at right time, HR planning becomes effective. In the alternative case, it tends to be ineffective.

8. Nature of Human Resource Market

Human resource market consists of people with skills and abilities from where an organization may fill its positions. Nature of human resource market affects availability of people with requisite skills and abilities. In India, there is a paradox so for availability of human resources is concerned.

On the one hand, there is abundant supply of people so far as their educational qualifications are concerned. On the other hand, only a very small percentages of such people are employable because of poor quality of majority of educational institutions. Therefore, while assessing supply of human resources, this fact must be kept in mind.

9. Outsourcing HRM Functions

Some HRM functions which are of administrative nature may be outsourced instead of performing these functions internally. To the extent HRM functions are outsourced, HR planning workload gets reduced. If an organization adopts practice of outsourcing HRM functions, it may concentrate on core HR issues in HR planning.