Human Resource Planning
                       Challenges for Industrial/Organizational Psychologists
                    ...
some of the activities that industrial/organizational (I/O)     reading skills, nearly one fourth of the high school grad-...
tivities related to the four phases of human resource            rizons, we do not mean to suggest that organizations seg-...
jections about the availability of human resources, which         combined with employee surveys designed to assess at-
in...
example, recruiting programs are used to influence the                      As the labor pool shrinks, however, selection ...
ogists, the effectiveness criteria were almost exclusively      tion. Predicting outputs requires considering factors such...
limitations, however. For example, when experts disagree,         over, retirement, and employee-initiated job changes.
in...
The accuracy of statistical techniques for forecasting          C ging technology creates the need for training.
future su...
Because employees who deliver services must engage        given by the faculty of Tuskegee Institute for students in
in se...
The task force also developed several training pro-         inaccurate stereotypes common in our, society. I/O psy-
 grams...
bell & Campbell, 1988). Only recently have I/O psycholo-              nization. The key activities in succession planning ...
time providing experiences for these managers to help            in their training programs for managers and to offer
them...
cation, February 7, 1989). The size of IBM combined            the quality of work life and the beginnings of an organi-
 ...
Human Resource Planning
Human Resource Planning
Human Resource Planning
Human Resource Planning
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Human Resource Planning

  1. 1. Human Resource Planning Challenges for Industrial/Organizational Psychologists Susan E. Jackson and Randall S. Schuler New York University A BSTRACT:• Human resource planning has traditionally an organization's effectiveness, it must be integrated with been used by organizations to ensure that the right person the organization's short-term and longer term business is in the right job at the right time. Under past conditions objectives and plans.' Increasingly this is being done in of relative environmental certainty and stability, human leading organizations, although in the past business needs resource planning focused on the short term and was dic- usually defined personnel needs and human resource planning, which meant that planning became a reactive process. The reactive nature of the process went hand- tated largely by line management concerns. Increasing in-hand with a short-term orientation. Now, major environmental instability, demographic shifts, changes in changes in business, economic, and social environments technology, and heightened international competition are changing the need for and the nature of human resource planning in leading organizations. Planning is increas- are creating uncertainties that are forcing organizations ingly the product of the interaction between line manage- to integrate business planning with human resource ment and planners. In addition, organizations are real- planning and to adopt a longer term perspective. For ex- izing that in order to adequately address human resource ample, according to Kathryn Connors, vice president of concerns, they must develop long-term as well as short- human resources at Liz Claiborne, term solutions. As human resource planners involve Human resources is part of the strategic (business) planning themselves in more programs to serve the needs of the process. It's part of policy development, line extension planning business, and even influence the direction of the business, and the merger and acquisition processes. Little is done-in the they face new and increased responsibilities and chal- company that doesn't involve us in the planning, policy or final- lenges. ization stages of any deal. (cited in Lawrence, 1989, p. 70) John O'Brien, vice president of human resources at In an early treatment of the topic, Vetter (1967) defined Digital Equipment Corporation, describes an integrated human resource planning as linkage between business and human resource plans as the process by which management determines how the orga- one by which human resource and line managers work nization should move from its current manpower position to jointly to develop business plans and determine human its desired position. Through planning, management strives to resource needs, analyze the work force profile in terms have the right number and the right kinds of people, at the right of future business strategies, review emerging human re- places, at the right time, doing things which result in both the source issues, and develop programs to address the issues organization and the individual receiving maximum long-run and support the business plans. According to O'Brien, benefits. (p. 15) such joint efforts occur when human resource planners Contemporary human resource planning occurs within convince corporate business planners that "human re- the broad context of organizational and strategic business sources represent a major competitive advantage" planning. It involves forecasting the organization's future ("Planning with People," 1984, p. 7) that can increase human resource needs and planning for how those needs profits when managed carefully. This article describes will be met. It includes establishing objectives and then developing and implementing programs (staffing, ap- We thank James Walker, two very helpful anonymous reviewers, and praising, compensating, and training) to ensure that peo- the special issue editors for their comments on previous drafts of this ple are available with the appropriate characteristics and article. In addition, we thank Henry A. Goodstein, BMR, Inc., and skills when and where the organization needs them. It Donald K. Brush, the Barden Corporation, for permitting us to quote may also involve developing and implementing programs our discussions with them, as well as Donald Laidlaw, the IBM Cor- poration, and Manuel London, AT&T, for their helpful insights. to improve employee performance or to increase em- ployee satisfaction and involvement in order to boost or- Correspondence concerning this article should be addressed to Susan E. Jackson, Department of Psychology, 6 Washington Place, New York ganizational productivity, quality, or innovation (Mills, University, New York, NY 10003. 1 985b). Finally, human resource planning includes gath- ering data that can be used to evaluate the effectiveness ' Throughout this article we use terms such as business objectives and business needs in a generic sense to refer to the bottom-line criteria of ongoing programs and inform planners when revisions against which an organization evaluates its performance. Our intention i n their forecasts and programs are needed. is to include the criteria considered by all types of employers, regardless Because a major objective of planning is facilitating of whether they are for-profit organizations. February 1990 • American Psychologist 223 Copyright 1990 by the American Psychological Association, Inc. 0003.066X/90/$00.75 Vol. 45, No. 2, 223-239
  2. 2. some of the activities that industrial/organizational (I/O) reading skills, nearly one fourth of the high school grad- psychologists are engaged in as they seek to improve the uates who entered the Navy read below the 10th-grade competitiveness of organizations through effective human level (National Alliance of Business, 1986). Such statistics resource planning. are alarming when compared to projections indicating that the levels of various skills needed for new jobs are Factors Underlying Increased Interest in likely to increase in the future (see Johnston & Packer, Human Resource Planning 1987). Undoubtedly, there are many factors that account for the A consideration of how the values of workers who increased attention directed to human resource planning, will soon make up the majority of the work force differ but environmental forces-globalization, new technolo- from those who will begin to leave it suggests additional gies, economic conditions, and a changing work force- changes on the horizon. There is already evidence of seem particularly potent (Dumaine, 1989; Dyer & Heyer, growing resistance from employees to relocation. Greater 1984; Greenhalgh, McKersie, & Gilkey, 1986). These emphasis on self-evaluation and a reduction in loyalty create complexity and uncertainty for organizations. Un- and dedication to employers makes it more difficult for certainty can interfere with efficient operations, so or- organizations to assume they can move employees around ganizations typically attempt to reduce its impact; formal anywhere and anytime (Maccoby, 1988; Mills, 1987). A planning is one common tactic used by organizations to decline in organizational loyalty is occurring at the same buffer themselves from environmental uncertainty time that workers are feeling insecure about their em- (Thompson, 1967). ployment (Hay Group, 1988). The changing characteristics of the work force, which A recent study comparing the work values of those is but one important environmental factor, make the over 40 years old with those under 40 years old suggested need for planning evident. Between 1976 and 1980, the other types of changes for which organizations must pre- labor force grew an average of 2.8%, but between 1991 pare. For example, employees from the younger genera- and 1995, the rate of growth will drop to 1.1 %. Addi- tion, who grew up during the Vietnam war, do not trust tionally, whereas more than 3 million people joined the authority as much as do members of the older generation, labor force in 1978, less than 2 million people are pro- who are products of the World War II era. The younger jected to enter the labor force each year from 1987 to generation thinks work should be fun, whereas the older 1995. Comparatively, the proportion of younger people generation sees work as a duty and vehicle for financial (aged 16 to 24) and older people (aged 55 and over) in support. Younger employees believe people should ad- the work force will decline. People aged 25 to 54 will vance as quickly as their competence permits, whereas constitute a greater percentage of the labor force, increas- older workers believe that experience is the necessary road ing from 61% in 1975 to 73% in 1995. The number of to promotion. Finally, this study found that for the youn- mothers in the work force with children under one year ger generation, "fairness" means allowing people to be old incre ased from 42% in 1980 to 55% in 1989. The different, but for the older generation it means treating ethnic mix of the labor force is also changing. The Bureau people equally ("Work Attitudes," 1986). of Labor Statistics estimates that ethnic minorities will Changes in the work force are just one aspect of the account for 57% of the growth in the labor force between environment stimulating the need for human resource now and the year 2000. Of the approximately 25 million planning. The demographic changes are somewhat pre- workers added to the work force between 1985 and 2000, dictable, but when they are considered in combination 42% are expected to be native White women and only with changing technology (see Davis & Associates, 1986) 15% are expected to be native White men. Fully 22% are and many of the other external changes described else- expected to be immigrants (Glickman, 1982; Johnston where in this issue (e.g., by Offermann & Gowing, pp. & Packer, 1987; "Managing Now," 1988; "Needed," 1988; 95-108), they pose significant challenges for human re- Nelton, 1988). source planning and contribute to its changing status All of these demographic projections have significant during the past two decades. i mplications for managing human resources, thereby in- creasing the importance of human resource planning A Model for Describing Human (Coates, 1987; Davis & Associates, 1986). The changing Resource Planning demographics mean there will be fewer entry-level em- In the remainder of this article, we describe the activities ployees, so competition among employers will increase. engaged in by human resource planners in leading or- In addition, the changing demographics signal changes ganizations. Throughout our discussion, we describe four in the abilities, skills, interests, and values of tomorrow's phases of human resource planning: (a) gathering and work force. For example, shortages of many types of analyzing data to forecast expected human resource de- skilled workers are imminent, including tool-and-die mand, given business plans for the future, and to forecast makers, bricklayers, shipbuilders, mechanics, machinists, future human resource supply; (b) establishing human and engineers ("Early Retirement," 1987). Even if or- resource objectives; (c) designing and implementing pro- ganizations are willing to train new employees, the task grams that will enable the organization to achieve its hu- may be difficult, as the U.S. Navy has found. At a time man resource objectives; and (d) monitoring and evalu- when many of its training manuals required 12th-grade ating these programs (Burack, 1988; Odiorne, 1981). Ac- 224 February 1990 • American Psychologist
  3. 3. tivities related to the four phases of human resource rizons, we do not mean to suggest that organizations seg- planning are described for three different time horizons: regate their planning activities in this fashion. The reality short term (up to one year), intermediate term (two to is that organizations must integrate their activities across three years), and long term (more than three years). These the four planning phases as well across all three time ho- correspond to the typical time horizons for business rizons, as is shown in Figure 1. As the feed-forward and planning. Using the same conventions that line managers feed-back arrows connecting the four phases of planning use to distinguish between activities with differing time illustrate, planning activities within a time horizon are horizons is one step human resource planners can take linked together into a dynamic system. Early phases (e.g., to facilitate integration of their efforts with the needs of demand and supply forecasts) serve as inputs to later the business (Hennecke, 1984; Migliore, 1984, 1986; phases (e.g., setting objectives). Equally important, or- Walker, 1978). ganizations can-learn-from the results generated during Although the four phases of human resource plan- the evaluation phase and then apply what is learned to ning are conceptually the same regardless of the time make adjustments in objectives and programs. horizon, there are practical differences in the operation- In addition to the arrows linking the four phases of alization of the four phases as the time horizon is ex- planning within each time frame, Figure 1 includes arrows tended. Therefore, we describe the activities related to to illustrate (a) how longer term objectives can influence planning for each time horizon separately and in turn, shorter term planning (dotted-line arrows), (b) how beginning with short-term planning. We begin with the shorter term evaluation results can influence projections shorter term planning horizon because historically the about future human resources and programs designed to activities of many I/O psychologists have been carried meet future demands, and (c) how the results achieved out for the purpose of achieving shorter term objectives. through the implementation of human resource programs As organizations and I/O psychologists began to recognize can influence business plans. The arrows connecting the potential benefits of engaging in longer term planning, planning activities for different time horizons are impor- however, consideration of longer term issues became more tant to note because they emphasize that planning for common. As a result, as is described near the end of this one time horizon typically has implications for another. article, many I/O psychologists are now engaged in ac- For example, long-term planning almost always prompts tivities designed to prepare organizations for the 21st the development of programs that need to be imple- century. mented in the short term and intermediate term. In ad- In separating our discussion of the phases of human dition, the evaluation results obtained for shorter term resource planning activities according to three time ho- programs often lead to reevaluation of longer term pro- Figure 1 Dynamic Linkages Among Components of a Fully Integrated System of Business and Human Resource Planning MR PLANNING ACTIVITIES TIME NORIZDI( CONTENT OF HR SYSTEM Projected Assess OR Develop Design & Evaluate Long Term E nuironmental Conditions Demand V Objectives I mplement Outcomes (3+ Years) Competitive Strategy Programs Supply L ife Cycle Stage I ndustry Sector 4 I 4 I I Projected Assess NO l:i Develop Design & Evaluate Intermediate-Term (2-3 Years) Enuironmental Conditions Demand S Objectives I mplement Outcomes -Competitive Strategy Supply Programs t 1 -Life Cycle Stage I -industry Sector I I I 4 I + i + Projected Assess HR Develop Design li Evaluate Short-Term Objectives I mplement Outcomes (1 Year) Enuironmental Conditions Demand 8 Competitive Strategy Supply Programs Life Cycle Stage -industry Sector February 1990 • American Psychologist 225
  4. 4. jections about the availability of human resources, which combined with employee surveys designed to assess at- in turn may prompt adjustments in programs designed titudinal predictors of turnover (e.g., job satisfaction) also to meet longer term needs. The ideal is to have full in- help I/O psychologists and human resource planners pre- tegration among all types of human resource planning dict how many currently filled positions are likely to be- activities as well as integration between human resource come vacant. Such information can produce useful pre- and business planning (Walker, 1988). dictions when the organizational unit of interest is large, although making predictions about precisely which po- Short-Term Human Resource Planning sitions are likely to become vacant is less precise. Predic- Many I/O psychologists work on activities related to de- tions about how many and what types of jobs will be signing and implementing programs (e.g., recruitment, eliminated or created in the short term generally follow selection systems, and training programs) to meet short- directly from business plans submitted by line managers. term organizational needs. Such activities generally in- How and where will we get people to fill and vacate volve an element of planning in that they are future-ori- jobs? The first step in answering this question-the sup- ented to some extent. Even projects for which objectives ply question-involves determining the desired charac- are expected to be achieved in as little time as a few teristics of employees who fill (or vacate) the jobs of in- months have, ideally, been designed with an understand- terest. Then the availability of those characteristics in the ing of how the short-term objectives are linked to the organization's current work force and in the external labor achievement of longer term objectives. For example, an market must be assessed. The particular characteristics aeronautics company engaged in a recruitment campaign of current and potential employees that are inventoried to hire 100 engineers should have a clear understanding and tracked by human resource planners are influenced of how this hiring goal will help the company achieve by the nature of the organization and the environment long-term goals such as becoming the world's most in- in which it operates. For example, for human resource novative company in that industry. This hypothetical planners in growing organizations, simply finding people company also might have a college recruiting drive de- with the needed skills and abilities is likely to be a top signed to find 75 college graduates to enter a training priority. For planners in mature and declining organi- program in recognition of the fact that a growing com- zations, the costs (e.g., salary level) associated with em- pany needs to prepare for the middle managers it will ployees become more salient, especially if work-force re- need 5 to 7 years hence, as well as the top level managers ductions are needed. Thus it is important for the human it will need in 10 to 15 years. As this hypothetical example resource planner to know the business needs and char- highlights, in order for a clear linkage to exist between acteristics of the organization. This knowledge is gained human resource planning and strategic business planning, by human resource planners meeting with line managers it is essential that an organization's top executives have to discuss their business plans as well as their human a fully articulated vision for the future, which has been resource needs. The process of discussion increases the communicated and accepted by managers throughout the accuracy of supply and demand forecasts and facilitates organization. the establishment of human resource objectives (see Schuler, 1988). Forecasting Demand and Supply In a short-term time horizon, demand and supply of hu- Establishing Objectives man resources can be predicted with some certainty. Hu- With a short-time horizon, objectives are often easy to man resource objectives follow logically from consider- state in quantifiable terms. Examples of short-term hu- ation of any discrepancies between demand and supply. man resource objectives include increasing the number Demand refers to the number and characteristics (e.g., of people who are attracted to the organization and apply skills, abilities, pay levels, or experience) of people needed for jobs (increase the applicant pool); attracting a different for particular jobs at a given point in time and at a par- mix of applicants (with different skills, in different loca- ticular place. Supply refers to both the number and char- tions, etc.); improving the qualifications of new hires; in- acteristics of people available for those particular jobs. creasing the length of time that desirable employees stay Salient questions are "What jobs need to be filled (or with the organization; decreasing the length of time that vacated) during the next 12 months?" and "How and undesirable employees stay with the organization; and where will we get people to fill (or vacate) those jobs?" helping current and newly hired employees quickly de- What jobs need to be filled and vacated? Answering velop the skills needed by the organization. Such objec- the demand question involves predicting who will leave tives can generally be achieved in a straightforward way jobs and create vacancies, which jobs will be eliminated, by applying state-of-the-art human resource management and which new jobs will be created. One method for pre- techniques and working with line managers to ensure dicting both vacancies and job growth is to project his- agreement with and understanding of the program ob- torical trends into the future. This is particularly relevant jectives. for organizations affected by regular, cyclical fluctuations in demand for their products or services. Behavioral the- Design and Implementation of Short-Term Programs ories of the causes of turnover (e.g., Mobley, Griffeth, The technical skills of I/O psychologists are often applied Hand, & Meglino, 1979; Mowday, Porter, & Steers, 1982) to short-term program design and implementation. For 226 February 1990 • American Psychologist
  5. 5. example, recruiting programs are used to influence the As the labor pool shrinks, however, selection ratios size and quality of the applicant pool. Selection programs will tend to become larger. As a consequence, small mar- are developed for making hiring decisions. Performance ginal gains in test validity will have less economic utility, appraisal systems identify performance deficiencies to be relative to the past. In order for investments in the de- corrected and competencies to be rewarded. Training velopment and use of sophisticated selection 'methods to programs emphasize developing skills for use in the near yield economic returns, much more energy will have to future. Compensation systems are designed to attract new be directed toward recruiting efforts to increase the num- employees, to motivate people to perform well, and to ber of job applicants because only by attracting a large retain employees. Even when these activities are designed pool of applicants can selection ratios be kept low. If small to achieve short-term objectives and are expected to have selection ratios cannot be maintained, organizations may relatively immediate pay-offs, they can serve to help an conclude that their resources are better invested in train- organization achieve its longer term goals. ing efforts designed to prepare those few who are available. Donald K. Brush, vice-president and general man- Examples of innovative' recruiting programs are al- ager of the Barden Corporation, described how short-term ready plentiful. Giant Food, Inc., has a mobile recruiting human resource planning efforts helped his organization office-a Winnebago van that is a self-contained recruit- achieve its strategic goals (Brush, personal communica- ment center that seeks out job applicants- by visiting tion, March 8, 1989): Barden realized it had an oppor- schools, shopping centers, and so forth. Coopers & Ly- tunity to significantly increase its business, but to do so brand employs successful minority business people in the would require them to increase their hourly work force community to help recruit minority applicants'' and to by a net of about 125 employees in one year, at a time serve as mentors. McDonald's Corporation has emerged when the local unemployment rate was only 2.5%. Past as a leader in the recruitment of older employees, which experiences had taught Barden that foreign immigrants it does by using television commercials and formal re- often became excellent employees. Although there were lationships with senior citizen organizations. It is impor- many immigrants from a variety of different countries tant to note that such efforts to broaden the pool of ap- who were interested in employment, a major hurdle to plicants often' require coordinated,- intermediate term their immediate success was their lack of fluency in En- programs designed to ensure that nontraditional new glish. Brush described the problem and the solution, like hires are effective and can be retained. this: Programs Evaluating Short-Term Human Resource As is true for any type of program evaluation, this phase To begin to be functioning, qualified Barden employees, new- involves assessing how well objectives were achieved. Be- comers must not only master the basic "Garden" vocabulary, cause short-term planning objectives are generally stated but they must be able to look up standard operating procedures, in terms that are relatively easy to quantify (e.g., numbers read Material Safety Data sheets, and they must also master of applicants, numbers of hires, and performance levels basic shop mathematics, measurement processes and blueprint reading... . We asked Personnel to investigate how we might teach these people enough English to pay their way. The upshot of employees), systematic evaluation of human resource programs to meet short-term organizational needs is quite was this: We retained Berlitz. A special intensive course was feasible, and some types of program evaluations are ac- developed in cooperation with our training unit.... All students tually common in large organizations. For example, in are on our payroll and meet with a Berlitz instructor four hours part because numerous federal and state laws prohibit a day for 15 consecutive work days during working hours. The some forms of discrimination, selection programs in par- effect has been electric. The confidence level of the students has ticular have been closely scrutinized to ensure that em- soared as they have tried out their new language ability. Super- ployers base their selection decisions on characteristics of visors are impressed. And the word is getting out to the com- applicants that are job related. Whether such scrutiny munity with positive results. (Brush, personal communication, will continue is somewhat uncertain, however, given re- March 8, 1989) cent Supreme Court decisions (e.g., Lorance v. AT&T This example illustrates a problem that organiza- tions will face increasingly in the near future, namely, a 1989; Martin v. Wilks, 1989; Patterson v. McLean Credit Union, 1989; Wards Cove Packing Atonia, 1989). shortage of qualified entry-level job applicants (Johnston & Packer, 1987). This demographic change is likely to mean that organizations will begin to shift the focus of Legal regulations have prompted many organiza- their short-term human resource programs. During the tions, especially large ones, to assess empirically the re- past 20 years, the combined forces of equal employment lationship between an applicant's characteristics (e.g., opportunity (EEO) legislation and the abundant supply abilities) and job performance. Such evaluation studies of new entrants into the labor force were congruent with (validity studies) benefit employers because they serve to human resource activities aimed at improving the ability monitor the objective of getting the right people in the of organizations to select employees on the basis of their right job. Validity studies also serve a scientific function job-related skills and abilities. Organizations benefitted by providing valuable data to researchers interested in from investing in the design, validation, and use of selec- improving our understanding of the factors that influence tion "tests" of all sorts. This is because even tests with human performance. relatively low, but nonzero, validity can have economic Until very recently, when programs for selection, utility when selection ratios are sufficiently low. training, and motivation were evaluated by I/O psychol- February 1990 • American Psychologist 22 7
  6. 6. ogists, the effectiveness criteria were almost exclusively tion. Predicting outputs requires considering factors such behavioral' (e.g., performance and turnover) or attitudinal as future demands from the marketplace for the products (e.g., job satisfaction and commitment). Such criteria and services that the organization provides, the percentage need no defense to be accepted by psychologists, but line of the market that the organization is likely to be able to management support for human resource programs can serve, the availability and nature of new technologies that be difficult to achieve if the expected resultss of such pro- may affect the amounts and types of products or services grams are not translated into the language of business, that can be offered, and the different countries in which that is, dollars. With continuing advancements in utility the organization expects to operate (Dumaine, 1989). analysis techniques (e.g., Boudreau & Berger, 1985) and The task of formulating plans that specify the in- human resource cost assessment techniques (e.g., Cascio, tended future outputs (in terms of quantity, type, and 1986), it is becoming more feasible to build convincing location) of the organization is usually the responsibility economic arguments in support of human resource pro- of middle-level line managers. Human resource planners grams. Thus, rather than having to spend energy arguing must then translate these objectives for outputs into pre- for resources to conduct short-term programs, I/O psy- dictions about the amount and the nature of jobs that chologists in organizational settings are being freed to employees will need to perform in order to produce the deal more extensively with intermediate-term and longer desired outputs. Predicting future human resource de- term human resource planning issues. , mands requires (a) having an accurate model of the factors Intermediate-Term Human Resource Planning that will influence demand and (b) being able to predict the state of all the major variables in that model. Orga- As we have noted, planning is used by organizations to nizations operating in fairly stable environments may be buffer production or service delivery processes from able to construct models that include most of the major sources of uncertainty. Human resource programs for the factors likely to determine demand for up to three years recruitment, selection, training, and motivation of em- into the future. It is even possible for some organizations ployees help reduce uncertainty byensuring that a suf- to quantify the expected values of variables in their mod- ficient number of people with the required characteristics els, which means they can use statistical forecasting tech- and skills are available at all levels in the organizations. niques such as regression analysis, ti me-series analysis, When the planning horizon is short, there is little uncer- and stochastic modeling to forecast human demand (e.g., tainty about which skills and how many people will be see Charnes, Cooper, Lewis, & Niehaus, 1978). For firms needed, and it is relatively easy to predict supply. operating in unstable environments, however, even three- However, rapid and ongoing changes in today's busi- year predictions' are likely to be highly uncertain because ness environment mean that the future cannot be easily both the variables and their expected values are difficult anticipated by simply projecting past trends. As the focus to specify accurately by relying on historical data. ofplanning moves from short term to intermediate term, Given the complexity of statistical forecasting, it is the question "What- will we need?" is less easily answered understandable that judgmental techniques are more and so becomes more dominant. For intermediate-term commonly used than statistical techniques (Kahales, Pa- honey, 1983).-A simple type of judgmental forecasting is planning, there is also more uncertainty related to the zer, Hoagland, & Leavitt, 1980; Milkovich, Dyer, & Ma- question, "What will be available?" Consequently, human raises the question, "How can we determine what will be resource planning for the more distant future quickly managerial estimation. Estimates of staffing needs are made by middle- and lower-level line managers who pass needed and what will be available?" In other words, more them up to top managers for further revisions to form an technical attention must be given to the problem of fore- overall demand forecast (Walker, 1980). Increasingly, hu- casting. As in short-term human resource planning, the man resource planners are involved in these stages of twin problems, of forecasting, demand and forecasting estimation and revision to ensure an integrated approach A moresophisticated method of judgmental fore- supply both must be addressed before objectives can be to planning. casting is the Delphi technique, established and programs developed. With increased un- certainty, interaction between the human resource plan- ner and line managers iseven more critical for making which is a decision-mak-g ing method designed to maximize the benefits and min- accurate demand and supply forecasts. imize the dysfunctional aspects of group decision making. In a Delphi "meeting" (which need not be face-to-face), Forecasting Intermediate-Term' Demand several experts take turns presenting their- forecasts and In order to forecast the numbers and qualities of people assumptions. An intermediary passes each expert's fore- who will be needed to perform the jobs that will exist in cast and assumptions to the others, who then make re- the organization's intermediate-term future (in two to visions in their own forecasts. This process continues until three years), strategic planners, attempt to predict orga- a viable composite forecast emerges. The composite may and sales levels. The outputs that an organization intends nizational outputs, such as expected production, volume, represent specific projections or a range of projections, depending on the experts' positions. The Delphi technique to produce or deliver, in combination with the technology appears to be particularly useful for generating solutions that the organization intends to use to generate the out- to unstructured and complex questions, such as those puts, dictate the human resource needs of the organza- that arise during human resource planning. It does have 228 February 1990 • American: Psychologist
  7. 7. limitations, however. For example, when experts disagree, over, retirement, and employee-initiated job changes. integrating their opinions to yield a final solution that all Consistent with the spirit of integration, increasingly line participants accept can be difficult (see Delbecq, Van de managers and human resource planners jointly establish Ven, & Gustafson, 1975; Milkovich, Annoni, & Mahoney, replacement charts for middle- and upper-level positions. 1972). Nonetheless, the human resource planner must Less common techniques to forecast supply are sta- integrate diverse predictions in order to establish human tistical techniques, which include simple inventory mod- resource objectives and design programs to achieve those els, Markov analysis, simulation (based on Markov anal- objectives, and line managers must accept the predictions ysis), renewal analysis, and goal programming (Dyer, as reasonable if they are to provide their support during 1982; Niehaus, 1979, 1980, 1988; Piskor & Dudding, the implementation phases of human resource programs. 1978). Use of statistical methods for forecasting human Both managerial estimates and the Delphi technique resource supply involves two steps, regardless of the par- typically focus on forecasting the number of employees ticular model used. The first step is generating an inven- that is likely to be needed. Less attention is usually paid tory of current supply (the number of people and their to the issue of the qualities (e.g., skills and abilities) that skills and abilities). The second step involves predicting future employees will need, primarily because techniques how the supply is likely to change over time. Ideally, both have not been widely available for predicting these steps consider both internal and external supply sources, (Goodstein, personal communication, February 9, 1989). although in practice it is often more difficult to estimate When psychologists engage in short-term planning, job labor supplies external to the organization. analysis is used to determine the qualities that employees I/O psychologists have been studying the nature of need in order to perform currently existing jobs. Rapid human abilities and the nature of jobs for most of this technological changes mean jobs in the future are sure century. Consequently, sophisticated techniques are to differ from jobs in the present (Zuboff, 1988), however. available for directly assessing employees' skills and abil- As an indication of the fact that I/O psychologists are ities (e.g., see Arvey & Faley, 1988; Schneider & Schmitt, now more often dealing with problems of intermediate- 1986), or the supply of skills and abilities available in the term planning, research efforts are underway to develop organization's work force can be inferred from job anal- procedures for conducting future-oriented ("strategic") yses of the jobs that current employees are performing job analyses (Arvey, Salas, & Gialluca, 1989; Schneider (see American Telegraph & Telephone, 1980; Arvey et & Konz, 1989) and for identifying the managerial com- al., 1989; Fleishman & Quaintance, 1984; Levine, 1983; petencies that are necessary for effective performance in McCormick, Jeanneret, & Mecham, 1972; U.S. Air Force, the future (DeLuca, 1988; Goodstein, personal com- 1981). By assessing the extent to which the current work munication, February 9, 1989). Because job analysis re- force possesses skills and abilities that can be transferred sults are the foundation on which most human resource to aid their performance in jobs predicted to exist in the programs are built (Page & Van De Vroot, 1989), the future, I/O psychologists can help organizations assess development of sound future-oriented job analysis meth- how much of a discrepancy exists between their current odologies is a challenge that I/O psychologists must meet skills profile and the profile required to meet their strategic before they can realize their potential as contributors to plan. Thus research by I/O psychologists clearly has con- the long-term effectiveness of organizations. tributed greatly to making it possible to inventory and forecast human resource supplies. At the same time, computer technology has increased the feasibility of keeping information provided from such inventories up- Forecasting Intermediate-Term Supply Supply forecasts can be derived from both internal and external sources of information, but internal sources are to-date (Murdick & Schuster, 1983). Furthermore, EEO generally most crucial and most available (Bechet & Maki, requirements have led many organizations to view such 1987; Miller, 1980). As with forecasting demand, two ba- inventories as highly desirable and perhaps necessary, so sic techniques help forecast internal labor supply-judg- statistical models have been developed to deal specifically mental and statistical. One judgmental technique used with this aspect of human resource planning (Bres, Nie- to forecast supply is replacement planning. Replacement haus, Schinnar, & Steinbuch, 1983; Krzystofiak, 1982; charts show the names of current position occupants and Ledvinka & La Forge, 1978). the names of likely replacements, providing a rough es- For statistical forecasting, current supply informa- timate of the "bench strength" of the organization. On tion serves as a starting point. Figures describing the cur- the replacement chart the incumbents are listed directly rent work force, both within the organization and exter- under the job title. Those individuals likely to fill the nally, are then transformed through statistical models to potential vacancies are listed directly under the incum- predictions of future supply levels. Such models require bent. Such lists can provide an organization with reason- the human resource planner to provide information about able estimates of which positions are likely to become how employees are likely to flow through the organization. vacant, and they can indicate whether someone will be Annual hiring levels, turnover rates, promotions, and ready to fill the vacancy (Walker & Armes, 1979). Present within-firm transfers typically are considered. The result performance levels, ages, and information about the loy- is a quantitative prediction of what the future work force alty of current employees can be used to predict future would probably be like absent the implementation of vacancies caused by raids of top talent, involuntary turn- programs designed to change the projected supply. February 1990 • American Psychologist 229
  8. 8. The accuracy of statistical techniques for forecasting C ging technology creates the need for training. future supply levels depends entirely on the accuracy of U.S. manufacturers are experiencing a revolution in the-user-supplied figures about how employees are likely technology. A century ago, the concept of assembly-line to flow through the organization and the accuracy of the production created an industrial revolution; today com- statistical model used to transform current supplies into puters are contributing to an electronic revolution. Blue- predicted future supplies. Accurate estimates and accurate collar employees who previously were expected to per- models of employee flows are most likely to be available form routinized tasks hundreds of times a day are now in organizations that have extensive record keeping pro- being expected to operate the sophisticated robots that cedures because these can be used to identify the typical perform the routine work (Johnston & Packer, 1987). In movement patterns of employees in the past. The U.S. addition, they are expected to use computers to monitor military is one example of such an organization,' and and evaluate, using statistical analyses, the flow of work much of the available research on statistical forecasting through the plant. Learning skills such as these often has been supported by the U.S. government. Extensive means employees first must be trained in basic math and use has been made of a simple inventory model in the computer use. In addition, they may be taught, in effect, U.S. Navy's public shipyards in conjunction with the Na- the logic of experimental design as a means for diagnosing val Sea Systems Command' (NAVSEA) efficiency study the causes of problems that arise. For example, at Frost (Niehaus, Schinnar, & Walter, 1987). The Navy used goal Inc., a small manufacturing company in Michigan, em- programming models extensively in its work on down- ployees were taught how to determine whether a quality sizing the civilian work force after the Vietnam war and problem was being caused by a particular operator or by in incorporating EEO planning needs (Charnes, Cooper, cular machine. Such determinations were possible Nelson, & Niehaus, 1982;;Charnes, Cooper, Lewis, & because extensive data were stored for each item pro- Niehaus, 1978). Other organizations that have successfully duced. The data included information about which par- used statistical forecasting include IBM (Dyer & Heyer, ticular machines were used in each step of the process, 1984), Merck (Milkovich & Phillips, 1986) and Ontario who was operating the machines, and whether the final Hydro (Rush & Borne, 1986). product met various quality standards. Thus, by applying the principles of analysis of variance, the cause of quality Establishing Intermediate-Term Objectives problems could be detected and corrected (Frost, personal communication, May 23, 1986). The retraining needed to provide these skills took approximately three years and After projecting future human resource supplies and de- was accomplished mostly on-the-job. mands, mands, intermediate-term objectives are set and action Service-related jobs require new management styles. plans are developed to meet' the objectives, through the joint efforts of the human resource planner and relevant managers throughout the organization. Differences in the Change in manufacturing technologies is a major stimulus for intensifying training at work, but it is not the only i mportant stimulus. Another fundamental shift is the types of objectives established` for the short and inter- that are feasible with two or three additional years of changing balance between goods-producing and service- mediate term reflect differences in the types of changes time. Thus, whereas short-term objectives include at- related activities. Even within organizations that are pri- tracting, accessing, and assigning employees to jobs, in- marily goods-producing, the value of a service orientation termediate-term objectives are more likely to include is now being recognized by U.S. businesses. With more readjusting employees' skills, attitudes, and behaviors to attention being directed toward service provision, the fit major changes in the needs of the business,' as well as natural question that arises is whether different manage- adjusting human resource practices to fit changes in the ment practices are needed to manage service providers. needs of employees.' The delivery of services differs from the production of goods in three ways: products are intangible rather Intermediate-Term Programs to Help Employees than tangible, customers are actively involved in the pro- Adjust to Changing Organizations duction -of services, and the consumption of services oc- curs simultaneously with their production (Bowen Schneider, 1988). The simultaneity of the production and Training and retraining' programs are often the method consumption processes means that quality control cannot of choice for achieving intermediate-term objectives. The nature oftraining used to prepare for needs that will exist be achieved by the inspect-and-correct (or reject) method those designed to provide basic skills training to new hires, in two to three years can vary greatly. Programs include of performance monitoring traditionally used in manu- facturing plants. Instead, quality control must occur at the point of service delivery. The service provider is re- advanced education for existing employees, language sponsible for ensuring the quality of service' during each training,' internships and work-study programs, and pub- and every interaction with a client. To maintain control lic school partnerships (see Bolick & Nestleroth, ,1988). over quality, service organizations need to control the The forces prompting organizations to develop such pro- grams are many; they include changes in technology, a process of service production rather than to monitor the quality of outputs (Mills & Moberg, 1982). In other words, shift from a manufacturing-based to a service-based economy, and the failure of some public school systems to produce high; school graduates who are competent to service providers must monitor and supervise their own join the work force (Perry, 1988). behaviors. 230 February 1990 • American Psychologist
  9. 9. Because employees who deliver services must engage given by the faculty of Tuskegee Institute for students in in self-supervision, high levels of employee commitment secondary school (Teltsch, 1988). Arizona State Univer- and involvement are needed. Creating conditions sup- sity, armed with a $100,000 grant from AT&T, is trying portive of such employee attitudes is complex; it requires to change the Hispanic cultural pattern that discourages careful planning and, in many cases, a willingness to college for women. Teams of mothers and their teenage change basic assumptions about how much power and daughters are brought to the college campus to impress information lower level employees should be given (see them with the need for college training and to help the Hollander & Offermann, this issue; Lawler, 1986). I/O young women become eligible for entrance (Teltsch, psychologists have already begun to study how various 1988). Such educational programs are illustrative of a personnel practices affect the involvement and commit- growing realization among employers that they must be- ment levels of employees, so a foundation exists for ex- gin to attend to the general educational needs of the work perimenting with job redesign, use of participative man- force in order to ensure its future productivity. These agement styles, and organizational structures built around programs are particularly striking because they represent small, stand-alone businesses instead of large hierarchical large investments in people who are not yet, and may and bureaucratic enterprises. never be, employees of the sponsoring organizations. Gaining cooperation with organizational changes Economic conditions force downsizing. A third ma- such as those just noted is particularly challenging because jor stimulus for intermediate-term human resource pro- managers' long-held beliefs about how to maximize em- grams is organizational restructuring, including mergers ployee performance are often brought into question. Cre- and acquisitions and the work force reductions that often ating attitudinal and behavioral change is difficult under follow. From their experiences with massive lay-offs in most conditions, but it is particularly difficult when there the past few years, organizations have become increasingly is uncertainty about the pay-offs. Thus a significant task sensitive to the importance of planning programs for is convincing those top-level executives whose resources dealing with the effects of lay-offs. Many organizations and support are needed that proposed human resource are trying to minimize the negative effects of lay-offs programs will be effective. This involves translating the through redundancy planning, outplacement counseling, scientific evidence into a form that is both understandable buy-outs, job skill retraining, creation of transfer oppor- and convincing. Short of this, I/O psychologists can at- tunities, and promotion of early retirements ("Early Re- tempt to persuade organizational leaders to adopt the tirement," 1987). perspective that organizational learning is an objective Digital Equipment Corporation (DEC) is an example worth pursuing in the interest of long-term survival of one company that combined several of these activities (Guzzardi, 1989). Consistent with this perspective would with an intermediate-term planning horizon to effect a be a willingness to implement programs on an experi- large-scale work force restructuring (see Kochan, mental basis in anticipation of gaining knowledge that is MacDuffie, & Osterman, 1988). It is an excellent example valuable even if the program is ultimately not a complete of an integrated effort between human resource and line success (see Staw, 1977). managers to solve an intermediate-term planning prob- A shortage of well-prepared new hires spurs outreach lem. During most of the 1970s and early 1980s, DEC programs. In the past, employers generally relied on on- grew rapidly, but a sudden and sharp stock price decline the-job training programs to teach new employees the in October of 1983 dramatically signaled the beginning specific job skills they needed, but a significant number of a new era for the firm. DEC's senior line managers and of organizations now recognize that they can begin shap- the vice-president of human resources projected staffing ing their future work force while students are still in needs for the next two years and determined they would school. Time, Inc., brings disadvantaged students from need to go through a major transition (rapid lay-offs were nearby schools to their company headquarters in New viewed as inconsistent with the company's organizational York City weekly during the school year to receive tutoring values). Top management gave responsibility for effecting in reading by employees in their offices. In 1982, Amer- the change to line managers at the plant level. A task ican Express and Shearson Lehman Hutton began the force of line managers and human resource staff developed Academy of Finance, which is a two-year program for a strategy and general guidelines for the process, which juniors and seniors. In addition to their normal curric- ensured some uniformity across different units within the ulum, Academy students take classes in economics and corporation. The task force established performance as finance and attend seminars designed to socialize them the primary criterion to be used when making cuts, in- into the culture of the financial services industry. Students tentionally choosing not to rely on seniority. The decision then work as paid interns during the summer (Perry, not to emphasize seniority was at odds with the impor- 1988). tance given traditionally to seniority by most unionized Honeywell, Inc., sponsors a summer Teacher Acad- and nonunionized manufacturing firms as they downsize emy, where Minnesota high school math and science (McCune, Beatty, & Montagno, 1988). At DEC, the eval- teachers team up with researchers to develop class projects uation data collected to monitor the downsizing process (Ehrlich, 1988). General Electric invested $1 million in revealed that seniority was a major criterion used by a program in a poor, Black, rural area of Lowndes County, managers, despite the policy to emphasize performance- Alabama. The program partly pays for tutoring sessions based decisions. February 1990 • American Psychologist 23 1
  10. 10. The task force also developed several training pro- inaccurate stereotypes common in our, society. I/O psy- grams. One program was for counseling employees and chologists working in such organizations now face the teaching them career planning skills. Managers were challenge of applying basic research findings on percep- trained to be supportive during the job search process. tion and attitude change to the design of interventions Retraining was offered to employees who could be trans- that will maximize the benefits of work-group diversity ferred within the company rather than laid off. Transfer and minimize the conflicts that often; arise. Another major opportunities could be identified by using a computerized challenge facing employers is the provision of conditions system for matching one's skills to available jobs facili- that permit employees to be fully productive at work, tating the reassignment of employees within the firm. while at the same time meeting the needs of their families, (Interestingly, however, the system was underused because including their parents, spouses, and children. Many of managers preferred to rely on their informal networks of the programs used by organizations to facilitate these contacts within the company.) In a two-year period, needs are described by Zedeck and Mosier (this issue, DEC's worldwide manufacturing work force was de- pp. 240-251). creased by 5,598 employees. Programs such as these are designed to facilitate the Kochan et al.'s (1988) description of DEC's experiences organization's effective adaptation to the diverse needs of with a work force reduction program raises a number of employees. They are particularly interesting because they interesting issues for I/O psychologists. For example, DEC's run counter to the normal tendency of organizations to experience with the computerized, but underused, job- manage individual differences through means such as matching system emphasizes the importance of developing normative pressure and sanctions intended to reduce the technical supports that capitalize on, rather than ignore, variance in employees' behaviors (see Katz & Kahn, interpersonal dynamics. Their experience with managers 1978). Organizational attempts to manage diversity by using seniority rather than performance as a criterion for pressuring employees to conform can be effective when targeting employees to be laid off emphasizes the importance (a) employees are able and willing to meet organizational of understanding perceptions of what constitutes "fair treat- demands, even when these conflict with the behaviors ment." The DEC example illustrates that even the most required to perform other, nonwork roles satisfactorily, conscientious planning does not guarantee that objectives and (b) the supply of potential human resources is suf- will be met. Knowing this, experienced managers might be ficiently large that employers can afford to retain only tempted to deemphasize the monitoringof outcomes in employees who do conform. order to reduce the visibility of program failures. However, The first condition was more easily met when the as the DEC example illustrates, by monitoring outcomes, typical employee was a man married to a nonworking significant opportunities are created for organizational spouse who could attend to family needs. As the work learning. force swells with people who are members of dual-career families and people who are single heads of households, both the ability and the willingness of employees to con- Organizations must adapt to a diverse workforce. The radical demographic transformation of the work force means that organizations need to develop competence in form to rigid organizational demands are likely to decline. managing a work force that is more diverse on many di- If, in addition, the total labor supply is relatively low, mensions, including age, ethnicity, family situation, ed- organizations will find themselves in the unfamiliar sit- ucational background, country of origin, and the attitudes uation of seeking ways to relax pressures to conform and and values associated with each of these factors. As a to assist employees in meeting their nonwork obligations consequence, there are an increasing number of training as a strategy for increasing the organization's attractive- programs designed to sensitize supervisors and managers ness to the scarce supply of labor. This will represent a to the wide range of individual differences represented in change from using behavior control mechanisms to man- the organization and the implications of such differences age the uncertainty diversity creates to managing uncer- for organizational functioning. For example, Hewlett- tainty by predicting variations in behavior and adapting Packard conducts training sessions for managers to teach the organization to them. them about different cultures and races and about their own gender biases and training needs (Nelson-Horchler, Evaluating Intermediate-Term Programs 1988). Proctor & Gamble has implemented "valuing,di- I/O psychologists have spent less time evaluating inter- versity" programs throughout the company. One example mediate-term human resource programs than evaluating is their mentor program, which was designed to retain short-term programs, partly because the intermediate Black and female managers (Copeland, 1988). Examples time horizon encompasses more uncertainties and con- of other programs include Equitable Life Assurance So- tingencies, as is illustrated in the example of DEC. Also, ciety's support groups for minorities and women, which because intermediate-term programs are often larger in periodically meet with the chief executive officer to discuss scope, the appropriate unit of analysis for evaluation is problems in the company pertaining to them, and Avon's often the productivity level of an entire department or employee councils representing various groups, which business unit. Although psychologists have sophisticated inform and advise top management (Copeland, 1988). measurement methods for assessing the, performance lev- Programs such as these show that many organizations els of individuals, our measurement techniques do not acknowledge the negative consequences of many of the translate easily into measures of productivity (see Camp- 232 February 1990 • American Psychologist
  11. 11. bell & Campbell, 1988). Only recently have I/O psycholo- nization. The key activities in succession planning are gists begun to apply aggressively their measurement skills identifying high-potential employees, identifying needed to developing measures appropriate for larger aggregates of competencies, and providing learning experiences to de- employees within organizations (e.g., see Pritchard, Jones, velop these competencies (DeLuca, 1988). Well-developed Roth, Stuebing, & Ekeberg, 1988). Progress on this task programs include a variety of components: selection pro- should be particularly valuable for intermediate-term and cedures, development plans, mentorships, frequent and long-term human resource planning. systematic performance reviews, and career planning ac- Long-Term Human Resource Planning tivities that involve employees in planning and monitoring their own development (e.g., see Hall & Associates, 1986; Increasingly, long-term human resource planning (for Leibowitz, 1988). Those programs known for their ex- beyond three years) is becoming critical to the effective cellence, such as those sponsored by IBM, Exxon, Squibb, functioning of organizations. The rapidly changing and and General Electric, represent large investments in in- highly competitive worldwide marketplace is causing tegrated human resource management systems (see firms to turn to their human resources for survival and Mahler & Drotter, 1986; Vancil, 1987). Such programs competitiveness. Because there is a greater understanding are examples of what can be done with respect' to long- that an organization's work force cannot be turned around term human resource planning, given the state of our on a dime, long-term human resource planning is gaining knowledge about human performance in organizational currency. It is an activity that demands integration of the settings, a belief in the value of investing in human re- skills and knowledge of the human resource planner and sources, and cooperation between the human resource all the other executives responsible for strategic planning. planner and line management. Although there are many types of long-term planning Staffing the upper echelons of organizations presents efforts, we use succession planning as our primary ex- a number of unique challenges, particularly when a com- ample of the process. pany practices a promotion-from-within policy. Because the planning horizon is so long, greater uncertainty exists when predicting both future demand and future supply. Forecasting Demand and Supply: The Challenge of The uncertainty in predicting supply is compounded by Succession Planning More than ever, a major long-term business concern in organizations is "What types of managers do we need the small numbers of people and jobs involved, which running the business into the 21st century, and how do changes the prediction task from one of estimating the we make sure we have them?" (Cowherd, 1986; London, percentage of a pool of employees who are likely to be personal communication, February 7, 1986). Consider with the company x years into the future to one of esti- this example: "Exxon is so far ahead in the succession mating the probability that a few particular individuals planning game that it has already hired its CEO for the will still be with the company x years into the future. year 2010. Although it is not public knowledge who that Providing developmental experiences to a greater number person is, he or she is already being challenged, assessed of employees helps reduce the uncertainty of forecasted and groomed for the top spot" (McManis & Leibman, supply (Leibowitz, 1988), but orchestrating developmen- 1988, p. 24). In describing how succession planning efforts tal experiences for large numbers of employees can be differ now from the past, Goodstein (personal commu- very difficult logistically because development is best ac- nication, February 9, 1989) pointed out that the turbu- complished by rotating employees through many key jobs lence and unpredictability of the current business envi- throughout their careers (see McCall, 1988). Predicting ronment has resulted in "a discernible trend" of substi- who will be available and with what capabilities is only tuting efforts to define more generic competencies for half of the problem, of course. Equally challenging is pre- efforts to identify specific knowledge and skills in the dicting the needs of the organization (DeLuca, 1988). specification of position requirements. H. A. Goodstein Organizations are dynamic systems embedded in (personal communication, February 9, 1989) contrasted dynamic environments. When planning for future needs, this with the only sure bet is that future -needs will be different "the old" technology of management succession planning, which from current needs. Popular wisdom has long held that was largely an exercise in replacement planning. Organizations different types of leaders are effective under different were planning within a model of minimal change in organization business conditions (Campbell & Moses, 1986; Gerstein structure (internal environment) and a perceived static external & Reisman, 1983). For example, the personal character- environment. Position requirements could easily be extrapolated istics of managers that lead to success during the start- from the job descriptions of current incumbents-factoring into up and early growth phases of an organization's life cycle these requirements those skills and abilities that the current may inhibit their performance when the organization incumbent lacked. Since position requirements were relatively reaches the phase of maturity and stability (Gupta & stable and career paths reasonably well-defined, an effective per- Govindarajan, 1984). For companies currently in the early formance appraisal system coupled with opportunities for key growth stages, this makes succession planning particularly executives to observe candidates adequately served the selection difficult. Because the needs of the future are inconsistent process for many companies. with current needs, the challenge is to find ways to max- Succession planning programs are complex systems imize the effectiveness of managers in the current orga- designed to safeguard the long-term health of the orga- nizational environment of rapid growth while at the same February 1990 • American Psychologist 233
  12. 12. time providing experiences for these managers to help in their training programs for managers and to offer them develop the skills they will need in the mature-stage training to more employees throughout the organization. organizational environment of the future. Supporting the notion that innovative organizations need Another type of major change that an organization to encourage flexibility and creativity, managers in in- may experience during a several-year planning horizon novative companies had jobs that required the use of more is a modification of their competitive strategy. Like a diverse skills (Jackson, Schuler, & Rivero, 1989). Results change from rapid growth to mature stability, a change such as these suggest that when organizations change in competitive strategies may have significant implications competitive strategies in response to a changing business for the types of managers needed. Competitive strategy environment, they may need to significantly alter broad refers to the means by which a firm competes for business patterns of employee attitudes and behaviors in order to in the marketplace (see Porter, 1985). Competitive strat- be successful in implementing a new competitive strategy. egies can differ along a number of dimensions, including To do so, they may implement major changes in various the extent to which firms emphasize innovation, quality- aspects of their personnel systems. The decision to change enhancement, or cost reduction (Schuler & Jackson, strategies requires a long-term perspective, and its success 1987). Briefly, the innovation strategy is used to develop depends in part on changing the work environment in products or services different from those of competitors; order to support needed changes in employee behaviors, the primary focus is on continually offering something which also requires a long-term perspective. Clearly, when new and different. Enhancing product or service quality organizations attempt to change their competitive strat- is the primary focus of the quality-enhancement strategy. egies, business and human resource planning should be In the cost-reduction strategy, firms typically attempt to fully integrated.' gain competitive advantage by being the lowest-cost goods producer or service provider. (Although these three com- petitive strategies are described as pure types, in practice Program Design and Implementation some overlap often occurs.) An early example of a company that used a psychological It is likely that successful pursuit of these three dif- testing program to integrate its business needs and long- ferent strategies requires employees to adopt different term human resource planning was Sears, Roebuck, & patterns of behavior. For example, organizations that Company. In the early 1960s, Sears realized it, would need pursue innovation as a strategy are likely to experience managers with unique abilities to guide the organization uncertainty because. the path to innovation includes a through a period of rapid expansion and growth. Based mix of spurts in progress and unforeseen setbacks (Quinn, on careful evaluation of the available talent and antici- 1979). In addition, the innovation process depends heavily pated future business conditions, Sears concluded that it on individual expertise and creativity. Steep learning should begin developing a talent pool that would include curves and the rapid speed at which knowledge is accu- people who had greater mental ability, who were psycho- mulated through experience make it difficult for orga- logically compatible with the company's need for inno- nizations to codify procedures. This means that employee vation and change, who were skilled administrators and turnover can have disastrous consequences (Kanter, effective decision makers, and who were emotionally sta- 1985). Furthermore, innovation often threatens the status ble yet aggressive (Bentz, 1968, 1983). To ensure that quo, causing some natural resistance and a volatile po- such people would be available and could be identified, litical climate (Fast, 1976). Sears developed a battery of psychological tests for use in These organizational conditions suggest that the their selection process, a process aided by the joint efforts pursuit of innovation is likely to be successful only if em- of line management and human resource planners. Such ployees behave in particular ways. A large literature on tests are now a general component of the long-range plan- innovation suggests that some of the behaviors needed ning efforts of many organizations because they help from employees in firms pursuing innovation include identify high-potential employees early in their careers creativeness, cooperation, risk-taking, flexibility, a long- (Bentz, 1983). term focus, and willingness to assume responsibility for For many organizations, succession planning and outcomes. Many of these behaviors are quite unlike those career development are tools for integrating diverse needed when cost reduction is emphasized in an orga- subgroups within a corporation (see Campbell, in press). nization. When cost reduction is the focus, predictability For example, Sara Lee Corporation has acquired more is valued over creativity, risk-taking is less appropriate, than 40 companies during the past several years. The and a short-term focus usually predominates (see Schuler company uses succession planning to move talented em- & Jackson, 1987). ployees through the different subsidiaries in order to build The differences in needed employee behaviors as- a consistent corporate culture and a sense of corporate sociated with different strategies have significant impli- unity (McManis & Leibman, 1988). The challenge of in- cations for human resource planning. For example, a re- tegrating diversity is even greater for IBM, which has op- cent study compared firms pursuing an innovation strat- erations in 132 countries. According to Donald Laidlaw, egy with firms for whom innovation was of little director of IBM's executive resources, succession planning importance. Firms pursuing an innovation strategy were systems at IBM are designed to cover human resource more likely than other firms to emphasize long-term needs needs in all 132 countries (Laidlaw, personal communi- 234 February 1990 • American Psychologist
  13. 13. cation, February 7, 1989). The size of IBM combined the quality of work life and the beginnings of an organi- with the tremendous diversity of environments with which zational restructuring. The experiment is revealing the it must cope make predicting specific needs in the long limits of our knowledge about how to change an orga- term more or less impossible. This means effective leaders nization's approach to managing people, an4 at the same will be people who can deal well with ambiguity and who time it is contributing to our knowledge about how to are broadly trained in all aspects of running a business. manage change. It is also providing another excellent il- Developing such leaders is the objective of IBM's extensive lustration of the integration of business needs and human succession planning and management development ef- resource planning. Most important, the description Banas forts. IBM's commitment to a general manager model of has given of the change process is likely to serve as a development led them to design a series of planned de- stimulus to new research. velopment positions that are used to test high-potential managers. Performance appraisals serve to continually revalidate initial judgments of future potential (and re- Evaluating Long-Term Programs duce executive management uncertainty). Presently most of our knowledge about how to develop Another company that has learned the value of hav- and improve long-term human resource programs has ing employees who can cope with ambiguity is AT&T, been generated through trial-and-error rather than whose world was turned upside down in the early 1980s. through systematic research. Nevertheless, much knowl- In 1982, AT&T agreed to divest itself of its operating edge about individual behavior and development has been telephone companies. By 1984, more than 11,000 em- gained by analysis of the massive amounts of data gen- ployees had chosen to leave AT&T rather than live with erated by large-scale, ongoing management planning sys- the massive changes that were about to take place as this tems. The excellent studies conducted within AT&T are former monolith was broken into eight different organi- models for how the practice of I/O psychology can inform zational units (Campbell & Moses, 1986). A leader in the the science of psychology (Bray, Campbell, Grant, 1974; design and use of assessment centers as a method for se- Howard & Bray, 1988). These studies shed light on the lecting managers for promotions, AT&T realized the need question of how ability and personality factors contribute to begin proactively using assessment centers for devel- to managerial career success, and they also informed us opmental purposes. In addition to using assessment cen- about patterns of change over the life span and between ters to develop managers' ability to cope with ambiguity, generations. AT&T is trying to ensure that the organization as a whole Understandably, what rigorous researchers engaged is prepared for the future by developing two very different in the evaluation of succession planning programs have types of leaders-those with high levels of functional ex- emphasized is the ability to predict individual outcomes, pertise and those with the broad expertise needed to be such as career progress and satisfaction. It is also now successful general managers (M. London, personal com- appropriate to evaluate long-term programs using cor- munication, February 7, 1989). porate outcomes such as share price, market share, receipt Although we have focused on succession planning of industry awards, and so on. In the spirit of integrating in this article, it is important to note that other types of business needs and human resource planning, such cor- long-term human resource planning efforts are equally porate indicators are legitimate criteria for evaluating i mportant. Space limitations prohibit us from discussing success, in addition to individual outcomes. Doubtless other types of efforts at length, but we offer one example there are many difficulties that complex, multifaceted in- terventions and long-term time horizons pose in drawing to illustrate what can be accomplished when long-term conclusions about cause-and-effect relationships; none- human resource planning is used to its fullest extent to link competitive strategy and human resource practices. theless, there are great opportunities for the I/O psy- The example is Ford Motor Company's massive quality chologist who adopts a long-term view and for human improvement program (see Banas, 1988). In 1979, top resource planners and line managers who coordinate their management at Ford acknowledged the need to begin efforts to assess the long-term effectiveness of human re- working to develop a new style of human resource man- source programs in corporate and individual terms. agement in order to achieve its goal of producing high- quality products at low cost ("At Ford, quality is job Conclusions one"). Since 1979, Ford has actively and aggressively sought to increase employee involvement. Philip Cald- Because the purpose of human resource planning is to well, as president of the company in 1978, ushered in the ensure that the right people are in the right place at the new era at Ford when he announced to the top executives: right time, it must be linked with the plans of the total "Our strategy for the years ahead will come to nothing organization. Traditionally, there has been a weak one- unless we ask for greater participation of our workforce. way linkage between business planning and human re- Without motivated and concerned workers, we're not source planning. Business plans, where they exist, have going to lower our costs as much as we need to-and we defined human resource needs, thereby making human aren't going to get the quality product we need" (cited resource planning a reactive exercise. A description of in Banas, 1988, p. 391). So began a major experiment in conditions in the 1970s was provided by Walker (1978) organizational change that included efforts to improve in the opening article of the inaugural issue of Human Resource Planning: February 1990 • American Psychologist 23 5

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