From a business perspective, employees can act as both an asset and a cost. For example, if a firm experiences economic downturn, reductions in the cost and numbers of employees will have to be made.
It is the HR planning function within HR that is responsible for finding the right balance between the changing demand for labout and a reliable source of supply.]
The planning process:
A plan must be both accurate, and also flexible, in order to adapt to the rapidly changing environment in which most organisations operate.
If a plan is based on poor data etc, it can result in inaccurate and misleading estimates of supply and demand numbers, resulting in either a costly surplus or shortage of employees.
Manpower planning or HRP? :
- HRP is concerned with motivating people and involves processes in which costs, numbers, and systems interact.
- Manpower planning is concerned with the numerical requirements of forcasting.
- However, there are important areas which overlap and interconnect between the two
HRP measurement and metrics:
- Absence - (this can result in lost production and sick payments)
- Turnover - (individuals who leave an organisation and are replaced)
- Stability - (percentage of employees with more than a stipulated amount of service)
- Vitality - (measuring the balance of internal promotion vs external recruitment)
Measurement in HR - the wider debate:
Mayo (2001) believes in the importance of quantification in HR. He is committed to the principal that everything can be quantified and in ways that facilitate management and change.
Mayo's main contribution is in his work on measuring the asset value of employees, rather than on measuring absence or turnover levels. His more sophisticated approach involves measuring..
- People's human capital - (can rise as a result of personal and competency growth)
- The financial and non-financial value to the organisation generated by each/all employees.
Measurement in HR - some important reservations:
Mooney (2001), suggests that managers need to consider the following criteria in deciding on their strategy on measurement..
- The relevance of the chosen measure to the overall business performance
- The amount of control that the HR function has over a particular measure
- The east and reliability of data collection
- Data quality
In addressing the potential and actual problems that managers experience with measurement, Pfeffer and Sutton offer the following suggestions..
- Effective measurement systems that drive behaviour need to be simple enough to focus attention on key elements and fair enough that employees believe in, and support them.
- Measurements need to guide and direct behaviour, but not be so powerful and coercive that they become substitutes for judgement and wisdom.