Human Resource Planning: Definition & Top Strategies
Human resource planning is a key strategy for ensuring long-term business sustainability and resilience.
In this guide, we’ll explore the essentials of human resource planning (HRP), why it’s so important, and the best practices to start your human resource planning process.
To learn more about the broader process of resource management, read our guide to business resource planning.
Key Takeaways
- HRP is a process that ensures that companies have enough capacity to meet customer demands and business goals.
- The main steps of the process include analyzing current availability, forecasting future demand, identifying capacity gaps, and developing and monitoring HRP strategies.
- Some of the main challenges include ensuring the accuracy of your forecasting with reliable data, maintaining the balance between billable work and capacity building initiatives, and promoting collaboration and transparency.
- The right capacity planning solution can help you address the above with automation features, real-time data, and predictive analytics.
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What Is Human Resource Planning (HRP)?
Human resource planning (HRP) is a process used to ensure that businesses have employees with the right skills, at the right time, and with the appropriate capacity to meet strategic goals.
Some practical examples of HRP workflows for various businesses include:
- An e-commerce business forecasting the need for IT capacity increases according to seasonal trends and scaling their infrastructure and support team.
- A design agency identifying higher demand for digital media through benchmarking and developing strategies to upskill and reskill its employee pool.
- A law firm initiating a succession planning strategy for the impending employee retirements by developing internal leadership candidates and recruiting external talent.
Why Is HRP Important? Top 4 Benefits
According to research by the Work Institute, 78% of the reasons for voluntary turnover could have been prevented by the employer if identified and addressed on time.
Human resource planning helps businesses increase employee engagement and drive various improvements by:
1. Maintaining a Qualified Workforce
HRP aligns talent capabilities with organizational goals through talent acquisition, training, and development initiatives. Ensuring you have a skilled workforce to meet future workforce requirements reduces the risk of inefficient workflows and supports daily business operations (learn more about the best operations strategy examples). Investing in employee talent and skills can also help increase employee engagement and satisfaction.
2. Improving Risk and Change Management
HRP is a proactive approach that focuses on identifying issues before they occur. Analyzing trends and forecasting future needs helps businesses create contingency plans for various scenarios. This can include high-impact external changes, such as technological advancements, or internal disruptions, like leadership transitions.
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3. Ensuring Your Business Is Competitive
HRP keeps businesses competitive by helping them attract the right talent and ensuring that current employees are skilled and engaged in the workplace. It helps companies adapt to changes quickly and efficiently, fostering the agility and proactiveness needed to stay ahead of industry trends and competitors.
4. Optimizing Workforce Costs
HRP optimizes business costs by providing balanced employee utilization so that your agency isn’t spending excess money on non-productive labor costs. It also ensures that your business can do more work with adequate supply. Finally, HRP reduces the chance of unexpected resource gaps through effective forecasting, minimizing the need for last-minute hiring or overtime work.
You can also check our guide to the capacity management process to learn more.
The Main Steps of Human Resources Planning
The key steps of HRP include:
- Workforce analysis to determine your company’s current human resource capacity.
- Demand forecasting to future resource demand based on industry trends and internal needs.
- Gap analysis includes finding potential roadblocks in your HRP process and developing strategies to address them.
- Implementation and monitoring of your human resource strategies, usually by tracking key performance indicators.
Analyzing Current Availability
Workforce analysis involves a comprehensive evaluation of the current workforce’s size, skills, and capabilities. It assesses aspects such as:
- Employee productivity
- Job satisfaction
- Skill sets, including technical and soft skills
- Seniority
- Turnover rates
These metrics are used to identify your organization’s strengths and weaknesses. This is the foundation on which you’ll develop actionable steps to improve your HRP processes.
The utilization rate is the key metric for visualizing productivity — use Productive for real-time insights
Projecting Future Demand
Projecting future demand involves estimating the human resource requirements needed for an organization to meet its future goals. This forecast considers factors such as business growth, market expansion, technological advancements, and changes in operational processes.
Three tools that are used in this process are:
- Ratio analysis, where historical data on the relationship between business metrics and workforce size is used to predict future staffing needs.
- Trend analysis, which examines patterns in the organization’s workforce data over time.
- Comparative analysis, whether by comparing internal resource planning practices across multiple projects or benchmarking your performance against competitors.
Another potential strategy is utilizing real-time data, such as forecasting charts that depict the impact of resource scheduling on agency analytics.
Productive’s forecasting charts let you predict your company’s revenue and profit margins
Gap Analysis
Gap analysis compares future human resource needs against the current workforce’s capabilities to identify discrepancies or gaps. A way to conduct gap analysis is to monitor where previous projects went wrong to pinpoint inefficiencies in your workflows, such as miscommunication or a deficit of specific skills. You can do this by checking estimated vs real completion times for various tasks — ERP solutions can deliver these insights with time tracking features.
Then, by examining your upcoming projects or initiatives, you can identify and forecast potential areas where similar imbalances may occur.
Developing and Implementing Strategies
The final step is developing and implementing HR strategies to cover your company’s specific needs and requirements.
These strategies may include:
- Creating a resource plan: A resource plan is an in-depth document that contains information on your employees, their availability, and their scheduled time. It helps businesses follow strategic objectives and monitor their ongoing processes.
Get an in-depth overview of your business resources and their availability
- Employee engagement and retention strategies: For example, drafting career development plans, introducing new benefits packages and competitive compensation, and promoting a healthy organizational mindset.
- Implementing modern software: Resource planning tools can support various steps of the HRP process, with features such as time off management, billable hours tracking, financial forecasting, real-time reporting, workflow automations, and more.
Best Practices for Effective HRP
Once you’ve pinpointed potential gaps and developed strategies to drive improvements, what are some best practices to ensure they stick?
Monitoring Your Progress
Whichever initiatives you decide to implement, monitoring them through capacity management metrics is necessary to assess their effectiveness. However, keep in mind that while business metrics are important, some benefits of HRP may be hard to quantify. This includes better work-life balance and improved working environment.
Regular Review
HRP can take a long time to provide results. Agility and flexibility are needed to make sure that your strategies can stay aligned with changing business needs and priorities. Regular review helps identify where your strategies have gone off track to implement timely changes.
Continuous Improvement
HRP is an ongoing process. As such, your strategies will need to evolve alongside your business goals and circumstances. Incremental improvements are always better than sudden, expansive changes — consistently seeking feedback and analyzing outcomes is a way to ensure your HRP strategies remain effective over time.
Types of HR Planning
There are different types or techniques associated with HR planning. Here are some common terms and how you can differentiate them:
Hard vs Soft HR Planning
- Hard HR Planning focuses on quantitative aspects of human resource management, such as headcount, costs, and labor allocation. This approach often involves in-depth data and forecasting for informed decision-making.
- Soft HR Planning considers qualitative factors of workforce management, such as engagement, development, and well-being. It’s less focused on data and more on fostering a committed and resilient workforce.
Short-Term vs Strategic HRP
- Short-term HRP is more of a reactive approach that addresses immediate staffing needs and focuses on resolving urgent issues. It typically spans a timeframe of up to one year.
- Strategic HRP is a long-term approach that aligns workforce planning with the organization’s future goals and strategies. It involves forecasting workforce requirements, sustainable talent management, and other proactive strategies for business success.
Employee Reskilling vs Upskilling
- Reskilling involves training employees in new skills and capabilities to help them transition to different roles within the company.
- Upskilling focuses on enhancing the current skills and competencies to improve performance, stay competitive, and meet job requirements.
To learn more, check out our article on the topic: what is capacity building and the best strategies for maintaining a skilled and satisfied workforce.
Future Trends in HR Planning
- Remote work is here to stay. According to survey results, 63% of professionals are willing to take a pay cut to work remotely (FlexJobs). If possible, consider including it as one of your benefits to drive a competitive advantage.
- In general, employee well-being initiatives are becoming more and more popular. This can include more flexible hours, hybrid or remote work, health insurance plans, as well as various fitness and wellness programs (learn more about workload management).
- 72% of professionals agree that all forms of skill-based hiring are more effective than resumes. While the resume is still used to filter the pool of applicants, work-related tasks and technical questions have proven to be the more efficient and cost-effective way of hiring candidates (Test Gorilla).
- When it comes to daily workflows, 60% of professionals believe that automation helps them fight burnout and work-related stress. It allows for a more flexible work schedule, helps them be more organized at work, frees up their tasks for work they enjoy, and more (Zapier). Consider tools that can provide no-code automations to streamline day-to-day work.
The Challenges of Human Resource Planning
Now that we’ve gone through the main steps of the HRP, it’s time to address some of its main challenges:
- Accurate forecasting: Predicting future needs accurately can be a challenge in itself. Not only does it require having an in-depth understanding of your business circumstances, but it’s also sensitive to changes in market demand and economic conditions.
- Maintaining a flexible workforce: Maintaining a versatile and skilled workforce requires careful management of work hours. This ensures that profitability isn’t compromised, and at the same time, avoids situations where training is neglected entirely for billable work. This balance between billable vs non-billable time is crucial for sustainable organizational success.
- Aligning HR Strategy with Business Goals: Keeping track of the overarching business strategy in HRP can be hard, especially in large or rapidly evolving organizations. It requires transparent communication, cross-functional collaboration, and a deep understanding of the organization’s long-term objectives and the role of the workforce in achieving them.
The Solution: Utilizing Software for Enhanced HR Planning
A way to address these potential challenges is using tools with HR and resource management capabilities. Modern software provides a way to visualize and forecast employee hours, activities, and their impact on business financials for more informed decision-making. It also helps businesses view project progress in real time to streamline stakeholder collaboration.
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An example of such a tool is Productive, with key HRP features including:
- Time tracking
- Resource scheduling
- Workload balancing
- Time off management
- Financial forecasting
- And more
Book a demo today to discover how Productive can help drive efficient human resource management.
You can also check this article to learn more about the benefits of ERP systems.
FAQ
What is meant by human resource planning?
Human resource planning (HRP) is the strategic process of ensuring your business has the correct number of skilled employees to meet company goals. It involves talent management, employee performance and data analysis, needs forecasting, and more.
What are the 5 steps in human resource planning?
The five main steps of human resource planning include identifying current organizational availability, demand forecasting, capacity gap analysis, strategy development and implementation, and results monitoring and analysis.
What are the 3 key areas of human resources planning?
The 3 key areas of human resource planning (HRP) include workforce forecasting, talent management, and gap analysis. Workforce forecasting involves analyzing current availability and predicting the future needs of the workforce. Talent management encompasses various strategies, from recruitment, training, and development to succession planning. Gap analysis involves pinpointing areas of improvement by identifying where capacity fell short of meeting demand (skills, quantity, time, etc.).
Why is human resources planning important?
Human resource planning (HRP) is important because it ensures that the workforce is aligned with the organization’s strategic goals. It helps businesses get the most out of their human resources, both by improving acquisition strategies, developing current talent, and increasing retention. HRP also supports organization agility, flexibility, and resilience by building a well-skilled and satisfied workforce.
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