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What is 'Human Resource Planning - HRP'

Human resource planning is the continuous process of systematic planning to achieve optimum use of an organization's most valuable asset — its human resources. The objective of HRP is to ensure the best fit between employees and jobs while avoiding manpower shortages or surpluses. The four key steps of the HRP process are analyzing present labor supply, forecasting labor demand, balancing projected labor demand with supply and supporting organizational goals.

BREAKING DOWN 'Human Resource Planning - HRP'

The HRP needs to be flexible enough to meet short-term staffing challenges while adapting to changing conditions in the business environment over the longer term. HRP starts by assessing and auditing the current capacity of human resources.

Analyzing Present Conditions with Human Resource Planning

The first step of human resource planning is to identify the company's strengths and weaknesses in the current labor pool. This is when a company performs a comprehensive audit of the skills, demographics, qualifications, experience and compensation of every worker. HR then has to determine if these statistics fit in line with the company's goals. Does the firm need to hire more staff to compete in a future marketplace, or are more automated tools necessary to capture more market share from competitors? Is the status quo acceptable, or should the company reorganize its staff so it can make more money?

HR forecasts demand based on the strategic goals of the company. HR managers may examine market trends, industry analyses and technological improvements to come up with ways to meet the company's goals. Forecasting retirements is also one major facet that needs consideration when businesses assess future staffing levels. Does the company need to replace retired employees, or can new technology do the job? Does a company need more full-time workers, part-time help or outsourced labor?

Striking a Balance Using Human Resource Planning

The next step involves balancing supply and demand. At this point, HR creates a gap analysis that lays out specific needs to narrow the supply of the company's labor versus future demand. Should employees learn new skills? Does the company need more managers? Do all employees play to their strengths in their current roles?

The answers to these questions let HR determine how to proceed, which is the final phase of the HRP process. HR must now take practical steps to integrate its plan with the rest of the company. The department needs a budget, the ability to implement the plan and a collaborative effort with all departments to make the plan happen.

The goal of HR planning is to have the optimal number of staff to make the most money for the company. Because the goals and strategies of the company change over time, HRP is a regular occurrence.

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