Strategic importance of Human Resource Planning

Human resources planning (HRP) is the process of forecasting future human resources requirements to ensure that the organization will have the required number of employees with the necessary skills to meet its strategic objectives. HRP is a proactive process, which both anticipates and influences an organization’s future by systematically forecasting the supply of and demand for employees under changing conditions and by developing plans and activities to satisfy these needs. Effective HRP helps an organization achieve its strategic goals and objectives, achieve economies in hiring new workers, make major labour market demands more successfully, anticipate and avoid shortages and surpluses of human resources, as well as control or reduce labour costs.

HRP has recently become a key strategic priority not just for HR departments but for strategic business planners as well. The existing labour shortage in Canada is forecast to increase to 1 million workers over the next 15 years.1 Currently, Canada is in the beginning stages of a major labour shortage. As the baby boom generation begins to retire, there are not enough candidates to fill vacant positions. On average, two out of every three job openings over the next decade will be focused on replacing retiring workers. In addition, fertility rates in Canada continue to decline, resulting in fewer possible workers for the future labour force. Combined, these conditions create a situation of fierce labour competition, further increasing the importance of effective HRP. Figure 5.1 highlights occupations that are currently facing a labour shortage or ones that are expected to face a labour shortage by 2015. HRP will be absolutely essential for successful strategy implementation.

As illustrated in Figure 5.2, key steps in the HRP process include analyzing forecasted labour supply, forecasting labour demands, and then planning and implementing HR programs to balance supply and demand.

Lack of or inadequate human resources planning within an organization can result in significant costs when unstaffed positions create costly inefficiencies and when severance pay is required for large numbers of employees being laid off. It can also create situations in which one department is laying off employees while another is hiring individuals with similar skills, which can reduce morale or productivity and can often result in turnover. The greater concern is that ineffective HRP can lead to an organization’s inability to accomplish short-term operational plans or long-range strategic plans.

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