1. Chapter 05 Human Resource Planning and Recruitment
Human Resource Management: Gaining a Competitive Advantage
Chapter 05
Human Resource Planning and Recruitment
Chapter 5, HR Planning and Recruiting, examines factors that influence the supply and demand for labor, and, in particular, focuses on what human resources managers can do in terms of planning and executing human resource policies that give their firms competitive advantage in a dynamic environment. Two of the major ways that societal trends and events affect employers are through (1) consumer markets, which affect the demand for goods and services, and (2) labor markets, which affect the supply of people to produce goods and services. In some cases, the market might be characterized by a labor surplus. In other cases, the market may be characterized by a shortage of labor. Reconciling the difference between the supply and demand for labor presents a challenge for organizations, and how they address this will affect their overall competitiveness. There are three keys to effectively utilizing labor markets to one’s competitive advantage. First, companies must have a clear idea of their current configuration of human resources. In particular, they need to know the strengths and weaknesses of their present stock of employees. Second, organizations must know where they are going in the future and be aware of how their present configuration of human resources relates to the configuration that will be needed. Third, where there are discrepancies between the present configuration and the configuration required for the future, organizations need programs that will address these discrepancies. Under conditions of a labor surplus, this may mean creating an effective downsizing intervention.
Under conditions of a labor shortage, this may mean waging an effective recruitment campaign. Chapter 5 looks at tools and technologies that can help an organization develop
and implement effective strategies for leveraging labor market “threats” into opportunities to gain competitive advantage.
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
Discuss how to align company’s strategic direction with its HR planning.
Determine labor demand for workers in various job categories.
Discuss advantages and disadvantages of ways to eliminate a labor surplus and avoid a labor shortage.
Describe various recruitment policies to make job vacancies more attractive.
List various sources from which job applicants can be drawn, their advantages and disadvantages and evaluation methods.
Explain the recruiter’s role, limits and opportunities.
After reading this chapter, you should be able to:
Discuss how to align a company’s strategic direction with its HR planning.
Determine labor demand for workers in various job categories.
Discuss advantages and disadvantages of various ways to eliminate a labor surplus and avoid a labor shortage.
Describe various recruitment policies that organizations adopt to make job vacancies more attractive.
List various sources from which job applicants can be drawn, their advantages and disadvantages, and evaluation methods.
Explain the recruiter’s role, limits and opportunities in the recruitment process.
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3. 3. Program Implementation &
3 Stages in HR
Planning Process
1. Forecasting
2. Goal Setting
&
Strategic Planning
3. Program Implementation &
Evaluation
Consumer and labor markets are two ways that societal trends and events affect employers. 3 Stages in HR Planning Forecasting 2. Goal Setting and Strategic Planning 3. Program Implementation and Evaluation
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4. McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

5. Forecasting Demand for Employees
Forecasting Techniques
Expert estimates (top down)
Trend projections (top down))
Success depends on accurate and freely shared information
Statistical modeling (top down))
Unit-demand forecasting (bottom up))
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6. Forecasting Stage of HR Planning
Determine Labor Demand
derived from product/service demanded
external in nature
Determine Labor Supply
Internal movements caused by transfers, promotions, turnover, retirements, etc.
transitional matrices identify employee movements in different job categories over time to chart historical trends in company’s labor supply
useful for AA / EEO purposes
Determine Labor Surplus or Shortage
Reference to Figure 5.1 and Table 5.1.
Once forecasts for labor demand and supply are known, the planner can compare the figures to ascertain whether there will be a labor shortage or labor surplus for the
respective job categories. When this is determined, the organization can determine what it is going to do about these potential problems.
Forecasting determines the demand and supply of human resources and predicts in what positions either surpluses or shortages will exist in the future.
1. Determining Labor Demand-Labor demand can be predicted by the use of statistical techniques such as leading indicator, which is an objective measure that accurately predicts future labor demand.
2. Determining Labor Supply-Internal labor supply is determined by a detailed analysis of how many people are currently in various job categories, modified to reflect changes in the near future caused by retirements, promotions, transfers, voluntary turnovers, or terminations. A transitional matrix is a table used to project internal labor supply. The matrix shows the proportion or number of employees in different job categories at different times and how people move from one job to another in the organization and how many people enter and leave the organization.
Determining Labor Surplus or Shortage—By comparing forecasts for labor supply and demand for specific jobs, the organization can determine what it needs to do.
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7. Forecasting Based Upon the History of the Organization (Trend Projection)
Notes:
Each column adds up to 1 (100%).
Each rows adds up to 1 (100%) with the exception of “Not in Organization.”
“Not in Organization” in 2009 represents new hires for 2012 – “Not in Organization” in 2012 represents those who have left.
McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

8. Forecasting Demand for Employees (Trend Projection)
McGraw-Hill/Irwin ©2012 The McGraw-Hill Companies, All Rights Reserved

9. Exhibit 5-3 Movement of Nurses
Exhibit 5-4 Probabilities of Retention of Nurses in Three Local Hospitals
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10. Options for Reducing Expected Labor Surplus
Option Speed Human Suffering
1. Downsizing
2. Pay reductions
3. Demotions
4. Transfers
5. Work sharing
6. Hiring freeze
7. Natural attrition
8. Early retirement
9. Retraining
Fast
Slow
High
Moderate
Low
Table 5.2 shows options for reducing an expected labor surplus including:
Downsizing
Pay reductions
Demotions
Transfers
Work sharing
Hiring freeze
Natural attrition
Early retirement
Retraining
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11. Options for Avoiding Expected Labor Surplus
Option Speed Revocability
1. Overtime
Temporary employees
3. Outsourcing
4. Retrained transfers
5. Turnover reductions
6. New external hires
7. Technological
innovation
Fast
Slow
High
Moderate
Low
Table 5.3 shows options for avoiding an expected labor shortage such as:
Overtime
Temporary employees
Outsourcing
Retrained workers
Turnover reductions
New external hires
Technological innovation
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12. Downsizing
Downsizing -planned elimination of large numbers of personnel to enhance organizational competitiveness.
4 Reasons for Downsizing:
reduce labor costs
technological changes reduce need for labor*
mergers and acquisitions reduce bureaucratic overhead
organizations change location of where they do business
* Economy wide, capital spending ratio increased over 300% between , indicating employers substituting technology for labor.
Downsizing – the planned elimination of large numbers of personnel designed to enhance organizational competitiveness.
Reasons why organizations downsize:
Cost reduction through decreased labor.
Technological changes reduce need for labor- Economywide, capital spending ratio increased over 300% between , indicating employers substituting technology for labor.
Closing outdated plants.
Organizations changed location of where they do business.
Mergers and acquisitions reduced the need for large bureaucracies.
For economic reasons, many firms relocated parts of operations.
Although downsizing has an immediate effect on costs, much of the evidence suggests that it has negative effects on long-term organizational effectiveness, especially for some types of firms.
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13. Possible Negative Effects of Downsizing
Long-term effects of an improperly managed downsizing effort can be negative.
Lower long-term profit, performance and productivity
Loss of talent
Disrupts social networks needed for creativity and innovation
Long-term effects of an improperly managed downsizing effort can be negative.
Lower long-term profit, performance and productivity
Loss of talent
Disrupts social networks needed for creativity and innovation
One study of 52 Fortune 100 firms shows that most firms that announce a downsizing campaign show worse, rather than better, financial performance. Reasons include:
Although the initial cost savings are a short-term plus, the long-term effects of an improperly managed downsizing effort can be negative.
Many downsizing campaigns let go people who turn out to be irreplaceable assets.
Employees who survive the staff purges often become narrow-minded, self-absorbed, and risk-averse.
Downsizing not only leads to a loss of talent, but in many cases it disrupts the social networks needed to promote creativity and flexibility. Many employees also start looking for alternative employment opportunities.
The negative publicity associated with a downsizing campaign can also hurt the company’s image in the labor market, making it more difficult to recruit employees later.
Especially in an age of blogs and text messaging, the once-private practice of laying off employees is becoming increasingly transparent, and any organizational mistake that gets made in the process is likely to become highly public. The key to avoiding this kind of reputation damage is to ensure that the need for the layoff is well explained and that procedures for implementing the layoff are fair. Although this may seem like common sense, many employers execute layoffs in ways that make matters worse. The key to a successful downsizing effort is to avoid indiscriminant across-the board cuts, and instead perform surgical strategic cuts that not only reduce costs, but also improve the firm’s competitive position.
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14. Early Retirement Programs
The average age of U.S. workforce is increasing.
Baby boomers are not retiring early due to:
improved health
fear that Social Security will be cut
mandatory retirement is outlawed
collapse of the financial and housing markets made it economically unviable to retire
Many employers try voluntary attrition among older workers through early retirement incentive programs.
As shown in Figure 5.2, the average age of the U.S. worker is increasing. Baby boomers are not retiring early due to:
improved health
fear that Social Security will be cut
mandatory retirement is outlawed
collapse of the financial and housing markets made it economically unviable to retire
Another means of reducing a labor surplus is to offer an early retirement program. Many employers try voluntary attrition among older workers through early retirement incentive programs.
Because of improved health of the older worker and decrease in physical demands of the job individuals are able to work long past the traditional retirement age. Although an older workforce brings experience and stability, it can be more costly than younger workers because of seniority, higher medical costs, and higher pension contributions. Many employers are stressing early retirement by offering incentive programs to older employees.
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15. Employing Temporary Workers
Hiring temporary workers helps eliminate a labor shortage and affords flexibility needed to operate efficiently during demand swings.
3 Advantages:
Temporary workers free a company from administrative tasks and financial burdens.
Temporary workers are often times tested by a temporary agency.
Many temporary agencies train employees before sending them to employers.
Some strategies can be turned on and off fairly painlessly, such as the use of overtime and/or temporary employees. Operational flexibility is the primary reason for this, although the use of temps also frees the firm from many administrative tasks and financial burdens (health insurance, pension, worker's compensation, life insurance, etc.). Smaller companies may use temporary agencies to do their employment screening for them. Training may be done by the agency as well. Temporary employees bring a fresh perspective to the firm, particularly if they have temped in a number of other organizations.
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16. Outsourcing and Offshoring
Outsourcing uses an outside organization for a broad set of services.
Offshoring is outsourcing where jobs leave one country and go to another.
To help ensure the success of outsourcing:
Choose an established, large outsourcing vendor.
Jobs that are proprietary or require tight security should not be outsourced.
Start small and monitor constantly.
Outsourcing—This occurs when a firm is interested in a broad set of services performed by an outside organization. Cost savings in this area are easily obtained because rather
than purchase and maintain their own specialized hardware and software, as well as specialized staff to support such systems, companies can time share the facilities and
expertise of a firm that focuses on this technology. Thus, a moderate-size company that might otherwise need to have a 15- to 30-person HR staff can get by with just 5 to 7 people devoted to HR because they share services with outside organizations. In addition to managing the size of the HR unit, it frees up HR managers to focus on more strategic issues.
Offshoring is a special case of outsourcing where the jobs that move actually leave one country and go to another.
b. Steps to take that help ensure the success of outsourcing strategies include:
When choosing an outsourcing vendor, it is usually the bigger and older the better.
Jobs that are proprietary or require tight security should not be outsourced.
It is a good idea to start small and monitor constantly.
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17. Affirmative Action Planning
Plan for various subgroups within a labor force.
Workforce utilization review is a comparison of the proportion of workers in protected subgroups with the proportion that each subgroup represents.
Workforce utilization review is a comparison that examines the proportion of a company's workers in a subgroup to the proportion that each subgroup represents in the relevant labor market. This comparison is used to determine whether any subgroups may be underutilized. Underutilization occurs when the proportion of the subgroup in the organization is lower than that of the labor market due to problems in selection process or from problems in internal movement or for other causes.
A voluntary affirmative action program may be implemented in which selection programs may be reviewed and revised to decrease the underutilization and/or increase the diversity of the organization and decrease the likelihood of a lawsuit.
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18. HR Recruitment Process
Job Choice
Job
Choice
Vacancy
Characteristics
Applicant
Characteristics
Human resource recruitment is the practice or activity carried on by the organization with the primary purpose of identifying and attracting potential employees, designed to affect the number of people who apply for vacancies, the type of people who apply for them, and/or the likelihood that those applying for vacancies will accept positions if offered. The goal of recruitment is to ensure that when a vacancy occurs, the organization has a number of reasonably qualified applicants to choose from. All companies have to make decisions in three areas of recruiting:
(1) personnel policies, which affect the kinds of jobs the company has to offer;
(2) recruitment sources used to solicit applicants, which affect the kinds of people who apply; and
(3) the characteristics and behaviors of the recruiter. These, in turn, influence both the nature of the vacancies and the nature of the people applying for jobs in a way that shapes job choice decisions.
Personnel Policies
Recruiter Traits
& Behaviors
Recruitment
Sources
Recruitment Influences
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19. Personnel Policies
Organizational decisions that affect the nature of the vacancies for which people are recruited.
Characteristics of the vacancy are more important than recruiters or recruiting sources.
Personnel Policies vary:
Internal versus external recruiting
Extrinsic versus intrinsic rewards
Employment-at-will policies
Image advertising
Personnel policies, in relationship to recruitment, affect the nature of the vacancies for which people are required and impact the ability of the organization to recruit and its level of success.
Internal versus External Recruiting—A decision must be made on whether to recruit from within or outside the organization.
Extrinsic and Intrinsic Rewards—Lead‑the‑market pay strategy is a policy of paying higher than current market wages.
Employment‑at‑will policies state that either party in the employment relationship can terminate that relationship at anytime, regardless of cause. Companies that do not have employment at will typically have extensive due process policies that describe steps an employee can take to appeal a termination decision.
Image advertising promotes an organization as a good place to work in general and may be particularly important for organizations in highly competitive labor markets that perceive themselves as having a bad image.
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20. Recruitment Sources JOBS Colleges & Universities Internal Sources
campus placement services
Internal Sources
faster, cheaper,
more certainty
Public & Private
Employment Agencies -
headhunters can be
expensive
External Sources
new ideas & approaches
JOBS
JOBS
Electronic Recruiting
Internet
Recruitment Sources—Since recruitment sources are unlimited, an organization must decide how to reach the best sources of potential employees.
Internal versus External Sources—Relying on internal sources is useful since employees are well known and are knowledgeable about the organization and jobs. However, there may not be enough internal recruits
2. Direct Applicants and Referrals
a. Direct applicants are people who apply for a vacancy without prompting from an organization.
Referrals are people who are prompted to apply for a vacancy by someone within the organization.
3. Advertisements in newspapers and periodicals – Typically are less effective than direct applicants or referrals and more expensive.
4. Electronic Recruiting – The growth of the information highway as opened up new vistas for organizations trying to recruit talent such as social networking sites., niche boards, search engine sites as well as job boards.
5. Public and Private Employment Agencies—Agencies will search their computerized inventory of individuals searching for work for an organization at no charge.
6. Colleges and universities may be an important source for entry level professionals. To increase effectiveness, organizations employ internship programs to get early access to potential applicants and to assess their capabilities directly.
Direct Applicants
& Referrals
self selection, low cost
Newspaper Advertising -
large volume, low quality
recruits
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21. Recruiters Functional Area Traits Realism
HR versus operating area specialist
Traits
warm and informative
Realism
realistic job preview
honesty
Recruiters—The recruiter comes late in the process, at which point an applicant has a good idea whether he or she is interested in the job. Since recruiters are perceived by the applicant to be "selling" the job, their input may be discounted. Recruiters may have more impact depending on a number of factors.
1. The Recruiter’s Functional Area—The recruiter is likely to be perceived as more credible if he or she is from the same functional area the recruit is being considered for.
2. The Recruiter's Traits—Critical traits appear to be warmth and “informativeness.”
3. The Recruiter's Realism—Deceiving candidates about the negative elements of a job may increase later turnover; however, telling candidates about negative elements does not appear to inoculate them against disappointment or make negative elements go away. Personnel policies that affect the job's attributes are likely to be more critical than recruiter realism.
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22. 2 Steps to Enhance Recruiter Impact
1. Provide timely feedback
2. Recruit in teams
Recruiters can provide timely feedback about the status of the job search, avoid unfavorable behaviors that send poor messages about the organization, focus on inexperienced applicants with whom they might be more influential, and avoid mixing recruitment with selection. Recruiting should be done in teams.
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23. Summary
HR planning uses labor supply and demand forecasts to anticipate labor shortages and surpluses to enhance organization’s success and reduce human suffering.
HR recruiting creates an applicant pool should a labor shortage occur.
Organizations can use recruiters to influence individuals’ perceptions of jobs.
HR planning uses labor supply and demand forecasts to anticipate labor shortages and surpluses. It also entails programs that can be utilized to reduce a labor surplus (such as downsizing and early retirement programs) and eliminate a labor shortage (like bringing in temporary workers or expanding overtime). When done well, HR planning can enhance the success of the organization while minimizing the human suffering resulting from poorly anticipated labor surpluses or shortages. HR recruiting is a buffer activity that creates an applicant pool that the organization can draw from in the event of a labor shortage that is to be filled with new hires. Organizational recruitment programs affect applications through personnel policies (such as promote-from-within policies or due process provisions) that affect the attributes of the vacancies themselves. They can also impact the nature of people who apply for positions by using different recruitment sources. Finally, organizations can use recruiters to influence individuals’ perceptions of jobs.
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