June 17, 2022
General
Iryna Viter

Human Resource Planning Done Right: A Step-by-Step Guide

Human resource planning connects your people to business goals. We've outlined the reasons why it's so important to nail it in a service delivery business.

People are the greatest asset of every knowledge-heavy business. As leaders try to capitalize on it, some succeed and others don’t. One reason why so many fall behind is because they haven’t mastered the art and science of human resource planning yet. 

Human resource planning (HRP) is at the core of efficient operations in any company selling people’s time and expertise. A resource plan is key to being able to maximize the efficiency of your team members, and therefore the business as a whole. In fact, 72% of managers practicing human resource planning are certain that it improves profitability.

Planning allows businesses to motivate and challenge current team members, while forecasting personnel needs enables businesses to scale. Without a proper resource planning process in place that engages employees, businesses risk losing their seasoned professionals. 

In fact, the Center for American Progress found employee turnover can cost a business up to 213% of a lost employee’s salary, particularly when it’s a senior member. This makes it important to encourage team members to stay with the business, and to have steps in place to minimize the cost of losing people when it does inevitably happen. 

A well-rounded human resource plan is one of such steps. Learn more about what it is and why every company needs it.

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What is human resource planning (HRP)? 

Human resource planning (HRP), also known as workforce planning, is an ongoing cycle of strategic planning. Its objective is to ensure that an organization's greatest asset—employees—is used to its best ability.

Human resource planning guarantees that employees and jobs are a good match while preventing workforce shortages or scarcities.

The HRP process consists of four important steps: 

- analyzing current labor supply,

- projecting demand

- balancing demand with supply, and 

- assisting in the achievement of organizational objectives. 

HRP is a crucial investment for any company since it allows them to remain productive and profitable.

Essentially, human resource planning is all about two things:

  • Making sure you have the best possible people in the best possible jobs. 
  • Making sure you have the right number of resources to meet the demand.

Looking at it like that, it seems fairly simple. But managing people and making plans that can be affected by people’s decisions is anything but.

The reason human resource planning is so important is it’s a huge contributor to the efficiency of your business. Consider again the two aims of planning.

If you have the best possible people in the best possible jobs, you have the most capable employees working in a capacity where they can make the biggest impact.

If you DON’T have the right number of resources in your business, you can be spending too much in wages, or spending too little, not making the progress you could, and over-working the staff you do have.

The objectives of HRP

In short, human resource planning has a number of objectives:

1. Anticipate future human resource needs in terms of quantity, quality and skills.

2. Identify the factors that affect the organization's ability to achieve its goals.

3. Determine the best methods for forecasting demand for human resources and for selecting new employees.

4. Evaluate alternative solutions for meeting anticipated and unanticipated human resource needs based on cost, efficiency, effectiveness and legal concerns (for example, equal employment opportunity).

5. Develop strategies for matching current human resource capabilities with organizational goals and objectives.

What are different roles of human resource planning?

To meet the objectives of human resource planning, HR departments need to wear different hats. Their role includes, but is not limited to the following:

1. Identifying future personnel needs

Whether it’s through employees moving on or hiring new people, it’s inevitable that the situation in your business will change. People come and go! How you manage that change can make a huge impact on the business performance.

Your human resource plan can include likely growth areas of the business, or contingencies for if certain people decide to leave. In both cases, you can identify and even grow a relationship with potential replacements before you look to start the hiring process. 

This is a fantastic way of ensuring that you can hire someone who can really add value to your business, and one reason why planning should be part of your human resource capacity.

2. Providing wider scope on the investment in resources

People are commonly one of the most valuable resources in a company, and having a human resource plan provides hugely important context for managing them.

Your plan allows you to refer to strategic thinking about the people you hire and the positions you hire them in. This is particularly advantageous when you’re looking to appoint a new position to grow your business. 

Without a human resource plan, you’d be guessing as to what area of the business you need to hire in and what the scope of that position would be.

Your HR plan also helps to inform you if there are roles that could be changed in order to maximize their contribution to your business.

3. Helping retain top talent

People are most likely to stay in jobs that are challenging, motivating and rewarding. When, in your HR planning process, you’ve identified how to structure a role so that it enables someone to maximize their contribution to the business, you give them those three things.

Your HR plan can also help to identify key employees with the greatest potential to impact the company in the future. Knowing that, you can take steps to ensure that top talent is satisfied and retained. 

It’s not always easy to attract the best people, so it’s important to do everything you can to keep them. 

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4. Assisting with expansion and diversification of resources

Workplace diversity is increasingly being recognized as hugely beneficial for businesses. Diversity promotes fresh opinions, different ideas and new ways of looking at things. Having an HR plan can guide the way you expand and diversify your staff. 

For example, in putting a human resourcing plan together you may realize that 90% of your team all fits within a very similar demographic. That doesn’t mean you should straight away fire a bunch of those people, but it can show you that you can place a higher value on making your next hire someone who comes from a more diverse background.

5. Analyzing employee turnover

Employee turnover is a natural phenomenon in running a business, and it’s not always a bad thing. However, as mentioned previously, replacements can be expensive, especially if it takes a new joiner some time to get up to speed in their role.

Human resource planning can help you to recognize how your attrition rate compares to similar businesses in your space. It provides valuable context to your turnover rate.

If you see your turnover is lower than your competitors, that’s a good sign that the people are engaged and satisfied. If it’s much higher, it could be an indication that they don’t enjoy their jobs as much as they’d like.

6. Helping with business expansion

If your business is looking to diversify and expand into new areas, you’re going to need the right people to help you succeed. Human resource planning gives you a roadmap for the types of role you need in order to make your new focus work as well as possible.

For example, say you are an e-commerce menswear retailer, and you want to start selling women’s clothes too. 

Without an HR plan, you might be able to come up with a few roles that you need to expand into that new area, but that would only be based on your instincts. When you take the time to come up with a plan, you’ll have much more insight into the specific roles that are needed, including some that you may not otherwise have thought of.

7. Training and developing the employees

Training and professional development is another tool you can use to keep your team challenged and motivated. Not only does it engage employees by adding to their skill sets, but you get the benefit of those new skills too.

Having a proactive approach to training really helps to retain people, and it’s also a good way of allowing employees to progress their careers within your business. 

It can mean you have a ready-made replacement for when someone decided to leave. Being able to promote someone internally is an advantage because they already know how your business works, so it’s worth developing the capabilities so they’re ready to take on more responsibility when the time comes.

5 steps in human resource planning

Every company’s strategic HR plan will be different depending on the state of their workforce and organizational goals. While you'll have lots of top performers accounting for a huge chunk of business success, there will be squeaking wheels to fix and resource demand predictions to make. 

However, following these five steps will help any human resource department create an effective strategy to retain qualified employees and plan for future human resources need.

Step 1: Take stock of your current processes and people

Start with analyzing your strengths and weaknesses with a magnifying glass. The aim? To create an employee skills inventory and perform a gap analysis. What skills are in demand? Who could be upskilled or reskilled? You’ll want to review the processes you have in place and the ongoing (current and new) employee training and development programs. 

According to McKinsey, 50% of leaders are mainly facing business problems due to an unforeseen skills gaps. The majority believe that upskilling and reskilling are the crux of the solution, yet only 13 percent feel confident about implementing them.

This is where you come in! Begin with reviewing your resource management software. Is it up to scratch? Do you get the necessary resource visibility, down to skills, competencies, allocations and utilization levels?

If you don’t have a proper solution, it’s time you invest in one because it’ll help you keep all critical information in one place. Not to mention, it’ll save you a ton of time as compared with running everything out of spreadsheets — more on this in a bit.

As you review, ask yourself the following questions: 

  • What are our current employee expenses? What tools do they use and what benefits do we offer them?
  • How many people are we working with, in what departments, and what are their top skills?
  • What processes do we have in place for improving the company culture and retaining employees?
  • Do employees have a career development plan? Are we investing in improving their skills?

It’s also a helpful idea to review job descriptions. Analyze whether they accurately reflect the nature of the job — both in terms of the work involved and how well they meet new employee expectations.

By doing all of this, you can pin down areas for future needs and training programs to improve the current employees. 

Step 2: Understand your business goals

Strategic resource planning helps you not only retain qualified employees, but it also helps you meet business goals and grow the agency further.

But before HR professionals can map out how the existing employees and future resources will help meet these goals, you need a strong grip on where the business is headed.

To this end, excellent alignment between the company leadership and the HR department is crucial. Sit down with the key roles in the company including the CEO and CFO to learn about the:

  • Company growth plan
  • Business strategy and vision
  • Short and long-term goals 

This will help you understand the skills needed to spur company growth. 

Step 3: Forecast future needs

Now is the time you bring together the skills inventory you created and the notes you made in the step above.

This will assist in understanding your business’s demand for employees and their supply — within their company and outside of it. From there, you’ll want to strategically manage the demand and supply. 

Let’s look at these two pillars for creating your strategic human resource plan:

  • Demand forecasting. This involves determining the need for potential employees. It answers how many employees to hire (quantity) and what talent caliber you need (quality) to meet your organization’s present and future needs.
  • Supply forecasting. This determines the current employees available to meet the demand you outlined above. A skills inventory helps with this. Depending on your current and future demand, you’ll also want to start looking outside your company for potential new hires who can help fulfill your business needs and goals.

Once done, you’ll find yourself in the challenging work of matching demand and supply. But what makes it challenging, you ask? Because the answer to meeting demand isn’t always a new hire. Instead, you can also match it by training current employees.

Step 4: Develop key strategies

Effective human resources planning goes beyond workforce planning. It goes on to improve hiring processes and take steps to improve the company culture and employee satisfaction.

Admittedly, that’s a lot of work. But a useful way to get started is by putting processes in place. These ensure uniformity and consistency.

For example, by having an onboarding process in place, you can make sure all new hires have the same positive experience and are happy to jump into working with your company. 

Processes also ensure that everyone knows what to expect, minimizing surprises and keeping the business running smoothly.

To get started, go back to the review you did on the processes your organization has in place. Now, create a list of which ones you don’t have. Begin work from there. Some ideas for essential processes to have in place include:

  • Employee retention
  • Employee relations
  • Talent development
  • Performance management
  • Employee remuneration and benefits administration

You’ll also want to audit the prevailing processes. Find out how effective they are, where there are roadblocks, and identify ways to improve them too.

Remember: good processes are a result of regular reviews and iteration. So keep auditing and revising your company processes now and then.

Step 5: Review and evaluate

With your HR planning process complete, it’s time you get into the execution phase. Rolling out your plan, however, doesn’t mean your job is done.

Instead, after giving it some due time, start evaluating how well it’s working. Ask yourself:

  • How well are company operations running?
  • How well is the plan helping achieve company goals?
  • How is this plan contributing to employee satisfaction and retention?
  • What are some roadblocks the process is facing or what are some problems it’s causing?

The answer to these questions will help you understand whether it’s beneficial to continue with the plan or if you need to change things up to better meet the business’s needs. 

How to improve your HRP process

Now that you know what human resource planning is, its benefits, and the key steps to creating a strategic human resource plan, let’s walk you through ways to improve it. 

1. Plan for different seasons of work

With agencies, it’s common to have busy seasons of work. It’s also likely there’s a time of the year when most of your team is off but client work keeps going. An effective HR resource strategy plans for these times.

Begin with marking important dates in the year and reviewing the workload from the past years. Add in other events such as employee retirement and departures too.

This will help you identify times when the seasonal workload is different than the typical workload. It’ll also help you strategize for the coming 12 months — creating backup plans, for example, working with freelance contractors when business demand is high.

2. Document your human resource strategy and processes

If you haven’t already, work out a central place and format for documenting your processes.

But make sure you create breathable or easily editable documents since strategizing is a continuous process that takes lots of iterations as per organizational goals and changes.

It’s normal to feel overwhelmed at the prospect of documenting strategies and processes though. However, the benefits that documenting delivers are countless. From making it easy to review, evaluate, and adjust your processes to simplifying sharing them with stakeholders, documenting helps significantly. Keep this in mind to beat the overwhelm.  

3. Assess staff’s skills regularly

This also includes their soft skills. But why bother assessing employees’ skills? Because:

  • It helps retain top talent
  • Assists you in meeting business goals, boosting client satisfaction, and retaining clients 
  • Helps you encourage employee growth as per their career development roadmap

Most of all, having a rundown of your staff’s skills assists in managing your project pipeline and allotting work as well. Not to mention, knowing what your employees can best accomplish helps with optimal resource utilization too.

Essentially, having a high-level overview of your staff’s skills is the only way to learn what skills your employee pool already has, what’s needed, and what’s changing in your workforce and industry (so your workforce can adapt accordingly).

Remember to assess not only current employee abilities and skills (including technical know-how and interpersonal skills) but also how your workforce capabilities compare with your competitors. The latter helps you plan for upskilling and reskilling so you can stay on top of your industry.

And while you’re at it, spot trends in employee performance evaluation data too. It’s important to pay attention to both positive and negative trends. In particular, review responses to training programs to understand how well your efforts are materializing into benefits.

4. Plan for business growth

Chances are your business started off with two team members. But grew along the way. Whatever the case may be, always plan for growth.

Evaluate the current services your agency provides, what services current clients are demanding, and what you’d like to offer down the line. Then, plan for future needs.

You’ll also want to think of specific tasks and jobs done in your company.

Write down the jobs and create accurate job descriptions. From there, prioritize which roles need to be filled in first. If you aren’t hiring soon, set benchmarks for when to start looking for the best candidates.

5. Use the right software

Investing in the right software from the get-go simplifies and streamlines human resource planning.

It serves as your single source of truth that offers an in-depth look at available resources, their hourly rates, skills, and more. It also gives an overview of the projects they’ve worked on and the tasks they’re currently handling.

What’s more, you can see how many hours they work typically and whether they’re underutilized or nearing burnout. This way, you can understand when employees are due and off and adjust workload/resources accordingly.

All of this helps with gap analysis, employee retention, resource planning, and optimal resource utilization — ultimately helping meet business needs.

Looking to choose the right software for your company? Let’s show you how in the next section.

How to choose the right human resource planning tool for your business 

Having a dedicated approach to people management is a core function of your human resources team. HR departments spend a lot of time ensuring everyone is efficient and productive.

Runn people management software makes this huge task much easier, quicker and more understandable. Benefits include:

  • Insights into resources to understand how well they’re being utilized and if they’re being overworked.
  • Visibility over the capacity of individuals and teams.
  • Simplified team messaging.
  • Customized, searchable people reports.
  • Analysis of people costs and profitability to the business.

People management software is a core component of HRP, and provides automated, in depth insights that allow you to maximize the benefit you get from your plans.

Final thoughts

Human resource planning can really help you to get the most out of your people, and minimize the impacts of unsatisfied members.

A good HR plan helps you mitigate the effect of staff turnover and anticipate future hiring needs, among other things. 

It can be hard to know where to start in making a plan for your business, which is where people management tools such as Runn become valuable. You’ll get people insights at the touch of a button, including useful areas that you may not consider if you were doing it manually. Most of all, you’ll understand the current state of your resources and see where you can look to improve.

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