The steps in a workforce utilization review are identical to the steps in the hr planning process.

fundamentals of Human Resource Management 4th edition by R.A. Noe, J.R. Hollenbeck, B. Gerhart, and P.M. Wright

CHAPTER 5

Planning for and Recruiting Human Resources

McGraw-Hill/Irwin

Copyright © 2011 by The McGraw-Hill Companies, Inc. All Rights Reserved.

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Chapter 5, Planning for and Recruiting Human Resources, examines factors that influence the supply and demand for labor, and, in particular, focus 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.

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What Do I Need to Know?

Discuss how to plan for human resources needed to carry out the organization’s strategy.

Determine the labor demand for workers in various job categories.

Summarize the advantages and disadvantages of ways to eliminate a labor surplus and avoid a labor shortage.

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After reading and discussing this chapter, you should be able to:

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What Do I Need to Know? (continued)

Describe recruitment policies organizations use to make job vacancies more attractive.

List and compare sources of job applicants.

Describe the recruiter’s role in the recruitment process, including limits and opportunities.

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After reading and discussing this chapter, you should be able to:

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The Process of Human Resource Planning

Organizations should carry out human resource planning so as to meet business objectives and gain a competitive advantage over competitors.

Human resource planning compares the present state of the organization with its goals for the future

Then identifies what changes it must make in its human resources to meet those goals

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Trends and events that affect the economy also create opportunities and problems in obtaining human resources.

To prepare for and respond to these challenges, organizations engage in human resource planning – defined in Chapter 1 as identifying the numbers and types of employees the organization will require to meet its objectives.

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Figure 5.1: Overview of the Human Resource Planning Process

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Figure 5.1 shows the human resource planning process.

The process consists of three stages:

Forecasting

Goal setting and strategic planning

Program implementation and evaluation

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Forecasting

Forecasting: attempts to determine the supply and demand for various types of human resources to predict areas within the organization where there will be labor shortages or surpluses.

There are three major steps to forecasting:

Forecasting the demand for labor

Determining labor supply

Determining labor surplus or shortage

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The first step in human resource planning is forecasting.

The primary goal is to predict which areas of the organization will experience labor shortages or surpluses.

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Forecasting the Demand for Labor

Trend Analysis

Constructing and applying statistical models that predict labor demand for the next year, given relatively objective statistics from the previous year.

Leading Indicators

Objective measures that accurately predict future labor demand.

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Usually an organization forecasts demand for specific job categories or skill areas.

After identifying the relevant job categories or skills, the planner investigates the likely demand for each.

The planner must forecast whether the need for people with the necessary skills and experience will increase or decrease.

There are several ways of making such forecasts.

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Determining Labor Supply

Transitional matrix: a chart that lists job categories held in one period and shows the proportion of employees in each of those job categories in a future period.

It answers two questions:

“Where did people in each job category go?”

“Where did people now in each job category come from?

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Once a company has forecast the demand for labor, it needs an indication of the firm’s labor supply.

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Table 5.1: Transitional Matrix – Example for an Auto Parts Manufacturer

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Table 5.1 is an example of a transitional matrix.

Matrices such as this one are extremely useful for charting historical trends in the company’s labor supply.

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Determining Labor Surplus or Shortage

Based on the forecasts for labor demand and supply, the planner can compare the figures to determine whether there will be a shortage or surplus of labor for each job category.

Determining expected shortages and surpluses allows the organization to plan how to address these challenges.

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Issues related to a labor surplus or shortage can pose serious challenges for the organization.

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Goal Setting and Strategic Planning

The purpose of setting specific numerical goals is to focus attention on the problem and provide a basis for measuring the organization’s success in addressing labor shortages and surpluses.

The goals should come directly from the analysis of supply and demand.

For each goal, the organization must choose one or more human resource strategies.

Organizations should retain and attract employees who provide a core competency (what makes it better than competitors)

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This is the second step in human resource planning as shown in the middle of Figure 5.1.

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Options for Reducing a Surplus

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Downsizing

Pay reductions

Demotions

Transfers

Work sharing

Hiring freeze

Natural attrition

Early retirement

Retraining

As the average age of many workers in skilled trades grows, the coming demand for workers in many trades is expected to outstrip supply in the United States. There is a potential for employers in some areas to experience a labor shortage because of this.

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Ask students:

“How can HR prepare itself for this reality?”

“What should be done now to avoid the shortage?”

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Options for Avoiding a Shortage

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Overtime

Temporary employees

Outsourcing

Retrained transfers

Turnover reductions

New external hires

Technological innovation

Table 5.2: HR Strategies for Addressing a Labor Shortage or Surplus

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This table describes each option for managing labor shortages and surpluses in terms of important factors to consider. These factors are speed, amount of suffering caused, and ability to change later.

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Test Your Knowledge

A public accounting firm of 250 employees realizes they have a surplus of 15 support personnel (not auditors). What should they do?

Hire temporary workers

Offer early retirement

Downsize people in those positions

Wait for attrition and implement a hiring freeze for those positions

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A public accounting firm realizes they have a surplus of support personnel (not auditors). What should they do?

Hire temporary workers

Offer early retirement

Downsize people in those positions

Wait for attrition and implement a hiring freeze for those positions

There may be more than one good answer depending on the student’s rationale. D would have the least negative impact but may take a long time. “B” Early retirement would likely entice more than just support personnel and perhaps more than just 15 people which could cause a labor shortage. Downsizing would be fast but could create morale problems and a poor public image although with the small numbers this may not be much of a problem.

“A” is not appropriate until the surplus is managed.

Implementing and Evaluating the HR Plan

When implementing the HR strategy, the organization must hold some individual accountable for achieving the goals.

That person must also have the authority and resources needed to accomplish those goals.

Regular progress reports should be issued.

The evaluation of results should not only look at the actual numbers, but should also identify which parts of the planning process contributed to success or failure.

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For whatever HR strategies are selected, the final stage of human resource planning involves implementing the strategies and evaluating the outcomes.

This stage is represented by the bottom part of Figure 5.1.

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Applying HR Planning to Affirmative Action

Workforce Utilization Review: a comparison of employees in protected groups with the proportion that each group represents in the relevant labor market.

The steps in a workforce utilization review are identical to the steps in the HR planning process.

The organization must assess current utilization patterns, then forecast how they are likely to change in the near future.

If the analyses forecast underutilization of certain groups, then goals and a plan will be established.

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Meeting affirmative action goals requires that employers carry out an additional level of human resource planning aimed at those goals.

The organization looks at the representation of subgroups in its labor force.

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Recruiting Human Resources

The role of human resource recruitment is to build a supply of potential new hires that the organization can draw on if the need arises.

Recruiting: any activity carried on by the organization with the primary purpose of identifying and attracting potential employees.

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The goals of recruiting (encouraging qualified people to apply for jobs) and selection (deciding which candidates would be the best fit) are different enough that they are most effective when performed separately, rather than combined as in a job interview that also involves selling candidates on the company.

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Figure 5.2: Three Aspects of Recruiting

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All companies have to make decisions in three areas of recruiting:

Personnel policies

Recruitment sources

Characteristics and behavior of the recruiter

These aspects of recruiting have different effects on whom the organization ultimately hires.

This is shown in Figure 5.2.

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Personnel Policies

Several personnel policies are especially relevant to recruitment:

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An organization’s personnel policies are its decisions about how it will carry out human resource management, including how it will fill job vacancies.

Each of these strategies have a particular set of pros and cons. Policies should be evaluated as to their ability to support the organization’s long-term strategy.

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Internal versus external recruiting

Lead-the-market pay strategies

Employment-at-will policies

Image advertising

Image advertising, such as in this campaign to recruit nurses, promotes a whole profession or organization as opposed to a specific job opening.

This ad is designed to create a positive impression of the profession, which is now facing a shortage of workers.

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Recruitment Sources: Internal Sources

Job Posting: the process of communicating information about a job vacancy:

On company bulletin boards

In employee publications

On corporate intranets

Anywhere else the organization communicates with employees

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Another critical element of an organization’s recruitment strategy is its decisions about where to look for applicants.

The total labor market is enormous and spread over the entire globe.

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Advantages of Internal Sources

It generates applicants who are well known to the organization.

These applicants are relatively knowledgeable about the organization’s vacancies, which minimizes the possibility of unrealistic job expectations.

Filling vacancies through internal recruiting is generally cheaper and faster than looking outside the organization.

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For the employer, relying on internal sources offers several advantages:

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One in Three Positions Are Filled with Insiders

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In a survey of large, well-known businesses, respondents said about one-third of positions are filled with people who already work for the company and accept a promotion or transfer.

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Recruitment Sources: External Sources

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Despite the advantages of internal recruitment, organizations often have good reasons to recruit externally. For entry-level positions and perhaps for specialized upper-level positions, the organization has no internal recruits from which to draw. Also, bringing in outsiders may expose the organization to new ideas or new ways of doing business.

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Direct applicants

Referrals

Advertisements in newspapers and magazines

Electronic recruiting

Public employment agencies

Private employment agencies

Colleges and universities

Figure 5.3: External Recruiting Sources – Percentage of Employees Hired

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Figure 5.3 shows which of the external sources of recruiting are used most among large companies surveyed.

According to the survey results shown in Figure 5.3, the largest share (about one-fourth) of new employees hired by large companies came from referrals, and the next largest share (almost 21 percent) came from direct applications made at the employer’s Web site.

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Evaluating the Quality of a Source

Yield Ratios

A ratio that expresses the percentage of applicants who successfully move from one stage of the recruitment and selection process to the next.

By comparing the yield ratios of different recruitment sources, we can determine which source is the best or most efficient for the type of vacancy.

Cost Per Hire

Find the cost of using a particular recruitment source for a particular type of vacancy.

Divide that cost by the number of people hired to fill that type of vacancy.

A low cost per hire means that the recruitment source is efficient.

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There are few rules that say what recruitment source is best for a given job vacancy.

Therefore, it is wise for employers to monitor the quality of all their recruitment sources.

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Table 5.3: Results of a Hypothetical Recruiting Effort

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Table 5.3 shows how the yield ratio and cost per hire measures are used by HR professionals.

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Your Experience

In your last job search, what was your experience with a recruiter or other point of contact before you were offered the job?

Lousy, I didn’t take the job

Lousy, but I took the job anyway

Great, but I didn’t take the job

Great, I took the job

The experience wasn’t memorable.

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In your last job search, what was your experience with a recruiter or other point of contact before you were offered the job?

Lousy, I didn’t take the job

Lousy, but I took the job anyway

Great, but I didn’t take the job

Great, I took the job

The experience wasn’t memorable.

Use this question as a starting point to discuss the factors that contributed to taking the job or not and to what extent the recruiter or point of contact had on that decision.

Follow-up with a series of “why” questions for those who responded to each option.

Recruiter Traits and Behaviors

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The third influence on recruitment outcomes is the recruiter – including this person’s characteristics and the way he or she behaves.

The recruiter affects the nature of both the job vacancy and the applicants generated.

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Characteristics of the Recruiter

Behavior of the Recruiter

Enhancing the Recruiter’s Impact

Recruiter Characteristics and Behavior

True = A False = B

Applicants respond more positively when the recruiter is an HR specialist than line managers or incumbents.

Applicants respond positively to recruiters whom are warm and informative

Personnel policies are more important than the recruiter when deciding whether or not to take a job.

Realistic job previews should highlight the positive characteristics of the job rather than the negative.

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The recruiter affects the nature of both the job vacancy and the applicants generated.

True=A; False=B

Applicants respond more positively when the recruiter is an HR specialist than line managers or incumbents.

False – applicants tend to respond more positively to someone who is currently in the job or a manager.

Applicants respond positively to recruiters whom are warm and informative

True - In general, applicants respond more positively to recruiters whom they perceive as warm and informative.

Personnel policies are more important than the recruiter when deciding whether or not to take a job.

True - For affecting whether people choose to take a job, the recruiter seems less important than an organization’s personnel policies that directly affect the job’s features.

Realistic job previews should highlight the positive characteristics of the job rather than the negative.

False - Realistic job previews provide background information about job’s positive and negative qualities.

Figure 5.4: Recruits Who Were Offended by Recruiters

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Figure 5.4 quotes applicants who felt they had extremely bad experiences with recruiters. Their statements provide examples of behaviors to avoid.

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Enhancing the Recruiter’s Impact

Recruiters should provide timely feedback.

Recruiters should avoid offensive behavior.

They should avoid behaving in ways that might convey the wrong impression about the organization.

The organization can recruit with teams rather than individual recruiters.

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Researchers have tried to find the conditions in which recruiters do make a difference. Such research suggests that an organization can take several steps to increase the positive impact that recruiters have on job candidates.

Through such positive behavior, recruiters can give organizations a better chance of competing for talented human resources.

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Recruiting Exercise (1 of 2)

You are the regional HR director of the restaurant chain (e.g., Ruby Tuesday’s or TGI Fridays) and responsible for recruiting all staff for the restaurants in your region.

One of the stores in your region needs to hire servers.

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Questions for discussion are on the next slide.

Recruiting Exercise (2 of 2)

What knowledge, skills, and abilities are required for the positions you are recruiting?

Will your sources of applicants be internal, external, or both? Explain.

What recruiting strategies will you use?

What metrics will you use to measure your success?

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Have them think about this as individuals for a couple of minutes and then work together with a partner to develop an approach.

1. This job should be familiar to them so they should have a good list of KSAs

2. Consider the right source based on the necessary qualifications of the employee. Also, consider promoting hosts to be a server if possible?

Costs should be a consideration as well as reach in terms of diversity.

What will they want to keep track of to measure their success? Job performance, time to hire, cost per hire, yield ratios, etc.

Summary

The first step in human resource planning is personnel forecasting. Through trend analysis and good judgment, the planner tries to determine the supply and demand for various human resources.

The next step is to determine the labor demand for workers in various job categories. Analysis of a transitional matrix can help the planner identify which job categories can be filled internally and where high turnover is likely.

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Summary (continued)

To reduce a surplus, downsizing, pay reductions, and demotions deliver fast results but at a high cost in human suffering that may hurt surviving employees’ motivation and future recruiting.

To avoid a labor shortage, requiring overtime is the easiest and fastest strategy.

Internal recruiting generally makes job vacancies more attractive because candidates see opportunities for growth and advancement.

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Summary (continued)

Lead-the-market pay strategies make jobs economically desirable.

Internal sources are usually not sufficient for all of an organization’s labor needs.

Through their behavior and other characteristics, recruiters influence the nature of the job vacancy and the kinds of applicants generated.

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