Analysing the environment and Forecasting future human resource needs

1. ANALYSING THE ENVIRONMENT

In this chapter we refer to the environment broadly as the context of the organisation, and this is clearly critical in the impact that it has on both organisational and human resource strategy. Much strategy is based on a response to the environment – for example, what our customers now want or what competitors are now offering – or in anticipa­tion of what customers will want or what they can be persuaded to want. In human resource terms we need to identify, for example, how difficult or easy it will be to find employees with scarce skills and what these employees will expect from an employer so that we can attract them. (See www.pearsoned.co.uk/torrington HRP Exercise, 3.1, note 1.) We shall be concerned with legislation which will limit or widen the conditions of employment that we offer, with what competitors are offering and with what train­ing schemes are available locally or nationally.

Data on relevant trends can be collected from current literature, company annual reports, conferences/courses and contacts and networking. Over recent years consider­able attention has been given to the need for companies to benchmark their activities, processes and outcomes against other ‘successful’ organisations. However much care needs to be taken to select the most appropriate benchmarks, and Denrell (2005) warns of how misleading it can be to look only at successful organisations, and recommends that unsuccessful organisations should be similarly explored. Looking at successes only may lead to the assumption that certain practices they use are critical to that success, and yet unsuccessful organisations may use similar practices. The key is understanding the context and considering the full picture of how organisations are differentiated. Table 3.1 gives examples of the many possible sources for each major area.

Once one has acquired and constantly updated data on the environment, a common method of analysis is to produce a map of the environment, represented as a wheel. The map represents a time in the future, say three years away. In the centre of the wheel can be written the core purpose of the organisation as it relates to people, or potential future strategies or goals. Each spoke of the wheel can then be filled in to represent a factor of the external environment, for example, potential employees, a specific local competitor, competitors generally, regulatory bodies, customers, government. From all the spokes the six or seven regarded as most important need to be selected.

These can then be worked on further by asking what demands each will make of the organisation, and how the organisation will need to respond in order to achieve its goals. From these responses can be derived the implications for human resource activi­ties. For example, the demands of potential employees may be predicted as:

• We need a career, not just a job.
• We need flexibility to help with childrearing.
• We want to be treated as people and not as machines.
• We need a picture of what the organisation has in store for us.
• We want to be better trained.

And so on.

2. FORECASTING FUTURE HUMAN RESOURCE NEEDS

2.1. Organisation, behaviour and culture

There is little specific literature on the methods used to translate the strategic objectives of the organisation and environmental influences into qualitative or soft human resource goals. In general terms, they can be summed up as the use of managerial judgement. Brainstorming, combined with the use of structured checklists or matrices, can encour­age a more thorough analysis. Organisation-change literature and corporate planning literature are helpful as sources of ideas in this area. Three simple techniques are a human resource implications checklist (see Figure 3.5), a strategic brainstorming exercise (Figure 3.6) and a behavioural expectation chart (see www.pearsoned.co.uk/ torrington HRP Exercise, 3.1, note 3). The HR scorecard may be a useful tool for this aspect of planning, and the use of scenarios may also be helpful (see, for example, Boxall and Purcell 2003; Turner 2002). Scenarios can be used to provide a picture of alternative organisational futures and alternative HR responses to these.

2.2. Employee numbers and skills (demand forecasting)

There is far more literature in the more traditional area of forecasting employee number demand based on the organisation’s strategic objectives. Both objective and subjective approaches can be employed. Objective methods include statistical and work study approaches.

Statistical models generally relate employee number demand to specific organisational circumstances and activities. Models can take account of determining factors, such as production, sales, passenger miles, level of service. A simple model might relate people demand to production, using a constant relationship, without making any assumptions about economies of scale. In this model if output is to be doubled, then employees would also need to be doubled. (See www.pearsoned.co.uk/torrington HRP Exercise, 3.1, note 4.)

More complicated equations can be formulated which describe the way that a com­bination of independent factors is expected to affect the dependent employee demand. By inserting new values for the independent factors, such as new projected sales figures, we can work out the demand for employees from the equation. The equations can also be represented as graphs, making the relationships clear to see. These models can be adapted to take account of projected changes in utilisation, owing to factors such as the introduction of new technology, or alternative organisational forms, such as high- performance teams.

The work-study method is based on a thorough analysis of the tasks to be done, and the time each takes. From this the person-hours needed per unit of output can be calcu­lated, and standards are developed for the numbers and levels of employees required. These are most useful when one is studying production work. They need to be checked regularly to make sure they are still appropriate. Work study is usually classified as an objective measure; however, it is often accepted that since the development of standards and the grouping of tasks is partly dependent on human judgement, it could be consid­ered as a subjective method.

A specialised procedure for the collection of managerial opinions is based on the idea of the oracle at Delphi. A group of managers anonymously and independently answer questions about anticipated human resource demand. A compilation of the answers is fed back to each individual, and the process is repeated until all the answers converge.

The way that human resources are utilised will change the number of employees required and the necessary skills needed. There are many ways to change how employees are used, and these are shown in Table 3.2. Some methods are interrelated or overlap and would therefore be used in combination. (See www.pearsoned.co.uk/torrington HRP Exercise, 3.1, note 6.) Interconnections between most of these areas and soft human resources planning are also apparent.

Source: Torrington Derek, Hall Laura, Taylor Stephen (2008), Human Resource Management, Ft Pr; 7th edition.