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  1. 1. Master of International ManagementMaster Thesis No 2002:18HUMAN RESOURCE PLANNINGA Case Study Based Analysis of the Extent to Which Organisations PlanforHuman Resources in the Contemporary Business EnvironmentJonas Andersson, Henrik Avasalu & David GabrielsonGraduate Business SchoolSchool of Economics and Commercial LawGöteborg UniversityISSN 1403-851XPrinted by Elanders Novum“Every time I have prepared a battle, I’ve been forced to admit that the planis useless......but planning is crucial”Dwight D. EisenhowerAbstractHuman Resource Planning (HRP) is a complex subject, particularly at thetimeof increasingly turbulent business environments delivering far morediscontinuities, which increases the tensions between the greater needforplanning and the greater difficulties of prediction. Although a complexsubject,the underlying purpose is straightforward, HRP is concerned with havingtheright people, with the right skills in the right places at the righttime.The purpose of this study is to investigate the nature of, and to whatextentcompanies are able to manage this complexity. For this study, eight casestudycompanies from different industries have been used in order to identifyif thereare any industry-specific differences or trends regarding HRP aspects.One of the results from our investigation of the studied companies showsthatthe degree of stability in their respective industries, in terms ofemployee
  2. 2. turnover and economic fluctuations, clearly influences the way in whichtheyapproach HRP.Key-words: Human Resource Management, Strategic Planning, HumanResource Planning, Turbulent Business Environment.TABLE OF CONTENTS1. Introduction ....................................................................................11.1 Research Background...................................................................................11.2 Problem Focus ..............................................................................................21.3 Objectives of the Study ................................................................................31.4 Delimitations ................................................................................................31.5 Structure of Thesis........................................................................................42. Methodology ...................................................................................52.1 Research Strategy .........................................................................................52.2 Research Method ..........................................................................................52.3 Data Collection.............................................................................................62.4 Data Analysis................................................................................................72.5 Research Credibility .....................................................................................82.6 Research Model ......................................................................................... 103. Theoretical Framework ...............................................................113.1 Human Resource Planning – Concept Clarification ................................. 113.2 The Evolution of HRP............................................................................... 123.3 The Contemporary Purpose of HRP.......................................................... 163.4 The Case for and Against HRP ................................................................. 183.5 Techniques for Managing Supply and Demand of Competence .............. 223.6 External and Internal Influences on HRP.................................................. 253.7 Different Types of Human Resource Planning ......................................... 294. Summary of Empirical Findings.................................................334.1 Ericsson ..................................................................................................... 334.2 Handelsbanken .......................................................................................... 374.3 McDonald’s – Sweden .............................................................................. 384.4 Mölnlycke Health Care ............................................................................. 414.5 Sahlgrenska Universitetssjukhuset............................................................ 464.6 Scandinavian Airlines System................................................................... 494.7 SKF Sverige AB ........................................................................................ 524.8 AB Volvo................................................................................................... 555. Analysis ......................................................................................... 595.1 Reasons and Motives for HRP among the Case Study Companies .......... 59
  3. 3. 5.2 Approaches to HRP ................................................................................... 605.3 Internal and External Influences on HRP.................................................. 635.4 Future Aspects of HRP .............................................................................. 676. Conclusions ................................................................................... 697. List of References ......................................................................... 737.1 Web sites.................................................................................................... 817.2 Annual reports ........................................................................................... 817.3 Interviews .................................................................................................. 818. Appendix ....................................................................................... 83Chapter 1 Introduction11. IntroductionIn this chapter we present the background of the subject and give an overviewof the research problem. We also discuss the objectives of the study, ourdelimitations and the structure of the thesis.1.1 Research BackgroundOrganisations are under increasing pressure to find ways to implementtheirstrategies in a rapidly changing business environment, in which planninglifecycles tend to shrink to reduce the ‘time-to-market’ intervals. Atthe sametime, organisations are putting more and more emphasis on aligning theorganisation and people in their attempt to achieve business goals. HRPisusually seen as an essential feature of the ideal-type model of humanresourcemanagement, even if it does not always appear to be given high priorityinpractice (Rothwell, 1995).The issue of effective planning for people was brought up long beforetheadvent of human resource management. However, there has been littleresearchevidence of its increased use or of its success. One possibleexplanation ispresented by Storey (1995), who argues that as the developing businessenvironment forces organisations to plan effectively for their humanresources,
  4. 4. the rapid changes in the business environment also makes it increasinglydifficult for organisations to plan with accuracy. In the light of thiswe want toinvestigate to what extent organisations plan for HR in today’sbusinessenvironment. We have identified two main concerns in order to arrive ataconclusion, namely what the underlying motives for conducting HRP are,andthe prerequisites for fulfilling these motives.Chapter 1 Introduction21.2 Problem FocusWith the research background in mind we have formulated the followingmainresearch problem:Main ProblemTo what extent do organisations plan for HR in contemporary businessenvironments?This problem has been further divided into two research problems:Research Problem 1What are the reasons and motives for conducting HRP among organisationstoday?The way in which organisations view HRP will have a great influence ontheway it is carried out.Research Problem 2How does the business environment in which the company operates affectHRP?According to theory, the increasingly turbulent business environment hashad agreat impact on organisations ability to plan.The two sub-problems of the study aim to provide a gap analysisconsideringthe expected outcomes of HRP, and the possibility to plan for HR, thusproviding an analytical platform on which the main problem can beinvestigated.Chapter 1 Introduction3
  5. 5. 1.3 Objectives of the StudyOur main objective with this study is to investigate to what extentorganisationsplan for HR. The aim specifically focuses on the increasingly turbulentbusiness environment causing new prerequisites for companies’ abilityto planfor HR. Furthermore, we aim at analysing the underlying reasons andmotivesamong our companies of study in regards to HRP.We argue that when these new conditions for planning are put intocontrastwith the reasons and motives behind HRP, an equilibrium between what isdesired and what is feasible will ultimately decide to what extent HRPispossible in the specific organisation.1.4 DelimitationsTo limit the scope of our research was of major concern for us in thebeginningof our work in order to arrive at some kind of starting point, on whichwe wereable to build a realistic and feasible study. We have limited our studyto includelong-term HRP. Our definition of long-term corresponds with thedefinition wehave found in literature, which refers to plans that extend over aperiod of twoyears into the future or more. This study is therefore not coveringactivitieswithin the HR departments concerning shorter time aspects, such as thedailywork with questions regarding salaries etc.Our study relies heavily on empirical data, due to the specifiedtimeframe andeconomic factors; it was not realistic to design our research to includevisits toorganisations outside of Sweden. However, most empirical data iscollected
  6. 6. from organisations with worldwide operations, thus representingadditionalmarkets.Chapter 1 Introduction41.5 Structure of ThesisIntroductionMethodologyTheoretical FrameworkEmpirical ResultsAnalysisConclusionsChapter 2 Methodology52. MethodologyThe aim of this section is to give the reader an insight into how the researchwas done. The section starts out by explaining what research strategy we haveused, followed by research method. Thereafter follows a description of the datacollection and data analysis. Finally, we discuss the credibility of our findings.2.1 Research StrategyThe strategies that are of interest to our study are surveys and amultiple casestudy. As one intention is to investigate each organisation’s realityby using theinterviewees as tools of information, we feel that using surveys willnot reveala clear and honest enough picture, as the respondents will be too muchguidedby our questions. Case studies are suitable for practical problems andthey areoften thought of as being problem-centred, small-scaled, andentrepreneurial.Moreover, one of the strengths of a case study is its unique ability touse a lotof different empirical evidence (Yin, 1994). Our main focus is toexamine towhat extent organisations plan for human resources. It is therefore notenough
  7. 7. to study the case of a single organisation. The research strategy thatis bestsuitable to our thesis is therefore a multiple-case study.2.2 Research MethodWe designed our study in such a way that the research findings willrepresentcomparative cases. They are comparative in the sense that the interviewsaresemi-structured, thus inviting the interviewees to enlighten additionalareas ofimportance. The cases are also comparative in the sense that all theinterviewees possess equivalent positions. However, our intention withthedesign of the study is at the same time to use contrasting cases, i.e.organisations from different industries and of a different size. Thepurpose ofsuch a design is to arrive at a basis on which we are able to drawcomparisonsand/or contrasts between organisations operating in different industrieswithvarying levels of turbulence in their surrounding business environments.Ourresearch includes cases from the following industries: aviation,engineering,restaurant, banking, telecom, hospital, and manufacturing. ThemanufacturingChapter 2 Methodology6industry is represented by two organisations, one operating withintransport andthe other producing single use surgical products.Our research method is clearly qualitative, as we conduct in-depthinterviewsfrom a relatively small sample of organisations. A qualitative approachenablesus to gain an extensive understanding of each case that we have studied,which
  8. 8. we feel is necessary in our attempt to find answers to our researchproblems.2.3 Data CollectionOur data collection involves several different strategies such asconductinginterviews and identifying comparable theories through various books andjournals. Moreover, annual reports from the various cases are reviewedin orderto have a more detailed understanding of the case study companies. Thereis nosingle source of information that can provide a comprehensive andcompleteperspective on the study (Merriam, 1998). It is therefore important forcasestudy research to use multiple sources of data to get as broad a view aspossibleabout each specific case.By collecting primary data we ensure our information to be relevant fromatime and real-life perspective. The secondary data provides us with adeeperunderstanding of the subject as well as the subject’s history anddevelopment.By gathering internal secondary data, i.e. annual reports, we learnedhow eachorganisation was structured etc., which in turn provided us with a soundplatform for each case that we built our interviews upon.2.3.1 InterviewsConducting interviews represents one of the essential sources ofgatheringinformation for a case study, which is true in our case study as well.The kindof interviews that we used is what Merriam (1998) refers to as semi-structuredinterviews, i.e. a mix of more or less structured questions where theinterviewis guided by a set of questions and issues to be explored.
  9. 9. Aware of some of the pitfalls of conducting interviews in this manner,such asresponse bias and reflexivity (Yin, 1994), we had neither predeterminedtheChapter 2 Methodology7exact questions nor the order of the questions. We had a set of topicsto beexplored common for each interview in order to be able to cross-analysetheanswers. However, the interviews were designed so that the respondentswerefree to bring up other issues they felt were of interest to the subject.Thiscreated a “discussion-friendly” atmosphere in which we were able toaskfollow-up questions.Our intention with the interviews was to explore factual data, observedby thepeople interviewed, regarding how their organisation works with longtermHRP, both in the present and historically. As we are unable to explorerealitywithin each organisation ourselves, we aimed at interviewing people whopossess the most factual data possible and people who have a goodinsight intothe subject of interest. The goal was therefore to interview the VicePresident ofthe HR function in each case company. Unfortunately, this could not berealised in three of the cases, however we feel that these threeintervieweespossess the adequate knowledge legitimate to our study. This willfurther bediscussed in section 2.5.The following persons have been interviewed:Andersson, Tove. Human Resources – Sahlgrenska UniversitetssjukhusetForslund, Mikael. Manager Human Resources – McDonald’s SwedenKrohn, Bo. Human Resource Manager, Region West – Handelsbanken
  10. 10. Leinar, Carl-Gustaf. Vice President Human Resources Sweden - EricssonLing, Magnus. Vice President, Head of Human Resources Services – SASPollnow, Claes. Deputy Managing Director – SKFSvensson, Kjell. Vice President Human Resources – AB VolvoSällström, Björn. Vice President Human Resources – Mölnlycke Health Care2.4 Data AnalysisIn our attempt to collect and organise data in such a way that we laterwill beable to conduct an analysis, we structure our analysis according to thestepspresented by Merriam (1998). The first step is to organise the data intopical orchronological order so it can be presented in a descriptive manner. ThenextChapter 2 Methodology8step is to classify the data into categories, themes, or types. Thefinal stepinvolves making conclusions, developing models, or generating a theory.All empirical data was organised in topical order according to thedesign of theinterviews and presented case by case. The classification of theempiricalfindings constituted the next step, which we also based on the questionsfoundin the interviews conducted. This truly enhanced our ability to cross-analysethe eight cases, since the comparable data were organised and classifiedinadvance. In the final step, our aim was to enlighten factors that aregeneralacross the eight cases. However, individual findings that we felt wereofinterest and of importance to our study were stressed as well.In the analysis we classify our findings into five categories:All of = 8 companiesA majority of = 5 – 7 companiesHalf of = 4 companies
  11. 11. A few = 2 – 3 companiesOne of = 1 companyAlso, in the analysis the following abbreviations will be used for ourcasecompanies:Ericsson = LMEHandelsbanken, Western Region = HWRMcDonald’s Sweden = MCDMölnlycke Health Care = MHCSahlgrenska Universitetssjukhuset = SUScandinavian Airlines System = SASSKF = SKFAB Volvo = ABV2.5 Research CredibilityOur eight case study companies were selected based upon one criterion,whichwas that they operate in different industries. As we are not intendingto mapHRP within the different industries but rather to examine differentindustries’prerequisites and their affect on HRP, we argue that one case companyfromChapter 2 Methodology9each industry is adequate for our study. Also, as the focus is put onindustryprerequisites we have not emphasised the issue of finding representativecompanies for their respective industries, as each company is affectedby itsindustry’s prerequisites no matter how they differ compared to itscompetitors.The time aspect of our study forced us to delimit ourselves in theresearch. Notonly did we have to consider the time aspect of the study but also thedifficulties for potential interviewees to find time for us. Our aimwith theinterviews was to interview persons whose opinion, no matter howsubjective it
  12. 12. may be, have the main influence on the ways in which their organisationconducts HRP. Rather early in the interviewing process, we learned thatthehigher the position possessed by the interviewee the better the abilityto answerour questions. The best potential interviewees therefore narrow down toonlyone person in each organisation, namely the person responsible for theHRfunction. As in the case of Sahlgrenska Universitetssjukhuset where theinterviewee holds a middle management position, all of our questionscould notbe sufficiently answered. We therefore complemented the answers withinformation from strategic company publications regarding HRP. AtHandelsbanken we interviewed the HR manager for the western region,whichis one of the seven regions in the Nordic area. Handelsbanken is adecentralisedcompany and every region is operated with great autonomy.In the other six cases, we have interviewed the person with the mainresponsibility for the HR function in each case study company. Weconsideredthem to be the only persons with enough in-depth knowledge and hence,mostappropriate for answering our questions regarding HRP. We considered theoption to interview more than one person in each company to get a widerperspective on the matter. However, it was soon realised that it was ofnoaugmenting value for our study since there are so few people within theorganisation with overall knowledge to sufficiently answer ourquestions.Chapter 2 Methodology1 02.6 Research ModelPROBLEM FORMULATIONANALYSISGATHERING OFTHEORETICAL DATA
  13. 13. GATHERING OFEMPIRICAL DATAEricssonAB VolvoSKFHandelsbanken, WesternRegionMcDonald’s, SwedenMölnlycke Health CareSahlgrenska UniversitetssjukhusetSASCONCLUSIONSChapter 3 Theoretical Framework113. Theoretical FrameworkThis chapter constitutes the theoretical framework on which we have focusedour research. The first three sections deal with defining the concept HRP, aswell as explaining its origins. These sections are the foundation necessary forexamining HRP in depth. Without a profound understanding of the concept, wewould be at the risk of losing our problem focus. Since HRP is a relatively vastand complex concept, the purpose of the remaining sections is to break theconcept down in order to get a more detailed insight of the different parts thatconstitute HRP.3.1 Human Resource Planning – Concept ClarificationAs in so many areas of personnel management, there is some confusionaboutthe precise meanings of the terms used to describe the human resourceplanningfunction. Here, as elsewhere, developments in terminology have moved onatdifferent speeds and in different directions than developments in theactivitiesthemselves, leading to something of a mismatch between the concepts andthelabels used to describe them. In this section we want to clarify what wemeanby the concept HRP.According to Taylor (1998), the main distinction is between those whosee the
  14. 14. term ‘human resource planning’ as having broadly the same meaning asthelonger established terms ‘workforce planning’ and ‘manpowerplanning,’ andthose who believe ‘human resource planning’ to represent somethingratherdifferent.According to Bramham (1994), there is a big distinction between the twoterms. He argues that ‘manpower planning’ is essentially quantitativein natureand is concerned with forecasting the demand and supply of labour, while‘human resource planning’ has a far wider meaning, including plansmadeacross the whole range of personnel and development activity. Theseactivitiesinclude soft issues such as motivation, employee attitudes andorganisationalculture (Ibid). The opposite opinion is that, the term ‘human resourceplanning’is simply a more modern and gender-neutral term with essentially thesameChapter 3 Theoretical Framework1 2meaning as ‘manpower planning.’ Both are concerned with looking aheadandusing systematic techniques to assess the extent to which anorganisation willbe able to meet its requirements for labour in the future (Taylor,1998). Theyare thus undertaken in order to assess whether an organisation is likelyto have‘the right people, with the right skills, in the right places at theright time’(Ibid). According to this definition, human resource planning is arelativelyspecialised sub-discipline within the general activity undertaken bypersonnelmanagers.
  15. 15. There are different views of the specific meaning of HRP. We argue thatit ismore than a quantitative approach, as we believe that issues such asemployeeretention, attitudes and motivation are essential features for havingthe rightpeople, with the right skills, in the right places at the right time.Thus, we agreewith Bramhams’s view that HRP has a wider meaning, encompassing“soft”HR issues and it is the one that is accepted for the purpose of thistext.3.2 The Evolution of HRPTo get a better understanding of what human resource planning is and how ithas emerged, this section will describe the evolution and development of HRP.In order to be able to determine if the changes in the business environmentsregarding turbulence have had any impact on HRP, it is essential to examinethe evolution of HRP.Since the origins of the modern industrial organisation, human resourceplanning has been a management function (Walker, 1980). Division oflabour,specialisation, organisation of management into levels, worksimplification,and application of standards for selecting employees and measuring theirperformance were all principles applied early in industrial management(Ibid).Planning for the staffing of work to be done is not something that hasbecomepopular in recent years. This is something that has grown to become whatit istoday. The relatively sophisticated techniques available to managementtodayare outcomes of a long period of evolution in practices, which starteddecadesago with simple, pragmatic, short term planning. The techniques used bymanagement tended to fit contemporary conditions and events (Storey,1995).Chapter 3 Theoretical Framework1 3
  16. 16. During the first part of the 20th century, for example, the focus inmanpowerplanning was upon the hourly production worker. The aim of improvingefficiency through work engineering and early industrial psychologyapplications was consistent with the need to improve productivity andintroduce greater objectivity to personnel practices (Ling, 1965;Merril, 1959;Yoder; 1952).During the Second World War and the post war years, the focusintensified onemployee productivity. There was also greater concern regarding theavailability of competent managerial personnel, as there was a talentshortagein combination with significant demand for goods and services. Newtechnologies and interests in behavioural aspects of work also addedcomplexities to the manpower planning task.In the 1960’s the demand for high talent personnel increased due tohightechnology programmes, rapid corporate expansion and diversification. Inorderto handle this increase, manpower planning practices were focused onbalancing supply with demand, particularly demand for managerial,professional and technical personnel. According to textbooks writtenduring thelater part of the 1960’s, manpower planning was viewed as a systemlinking theorganisation with its environment (Patten, 1969; Vetter, 1967).Walker (1980) argues that the most common view of manpower planning atthat time, which also dominated the literature until the 80s, was that“companies forecast their needs for manpower into the future, forecasttheirinternal labour supply for meeting these needs, and identify the gapsbetweenwhat will be needed and what will be available.” Further, manpowerplannersdevelop plans for recruiting, selecting and placing new employees,provide for
  17. 17. training and development and anticipate necessary promotions andtransfers(Buráck et al, 1972; Geisler, 1967; Henemann et al, 1968; Wikstrom,1971).The 70s came with new legislation, court decisions and governmentalregulations. Management attention then turned to affirmative actionplanningand other aspects of compliance. While many companies adopted thetechniques that had been introduced by leading companies during thepreviousChapter 3 Theoretical Framework1 4decades, other experimented with new tools such as career planning,activityanalysis, and reshaping of work (Walker, 1980).The majority of companies, however, were mainly concerned about thecompliance with the significant new regulations governingdiscrimination,safety and pensions. Generally, it was an unsettled decade, during whichmanagers had to deal with the energy crisis, uncertain costs andprofits, theslowing of business expansion and the increased concern regardingwomen’sliberation and reverse discrimination (Bramham, 1994).However, according to Bramham, it was during this time or decade that“manpower planning” was broadly being termed “human resource”planningand became widely established as a staff activity in major business andgovernmental organisations (Ibid). The term “human resource planning”implied a scope broader than just supply-demand balancing orquantitativeforecasting. Human resource planning shifted focus from being aquantitativeapproach, although recognising its importance, to a more comprehensiveviewof the process encompassing both needs forecasting and programforecasting(Ibid).
  18. 18. During the 80s and early 90s, human resource management researchers andprofessionals tended to place greater emphasis on employee attitudes andonthe development of personnel strategies to search for the enhancement ofpositive employee feelings and commitment (Zeffane and Mayo, 1994).Generally, these strategies lacked sufficient concentration on the needtocontrol the flow of personnel within and across organisationalboundaries(Walker, 1989). According to Richards-Carpenter (1989), this meant thathuman resource planning took a backward step in priority placing withintheoverall human resource management system. However, due to theincreasinglyuncertain socio-economic climate during the 90s, it was anticipated thattheHRP function was to become the focal activity, as it was increasinglybecomingan essential function across the organisation (Zeffane and Mayo, 1994).Assuch, the function underlined the importance and crucial role of dealingwiththe necessary changes in volume and make-up of the workforce. ZeffaneandMayo (1994) further state that HRP during the early 90s fundamentallyconsisted of a range of tasks designed to ensure that the appropriatenumber ofChapter 3 Theoretical Framework1 5the right people are in the right place in the right time. HRP was seenas a wayto plan for the future demand for people, which was carried out bycertaindynamic processes, designed to manage the flow of people into, throughandout of the organisation.Damm and Tengbland (2000) argue that in the future, the role of the HR
  19. 19. personnel is to provide and develop an attractive organisationalenvironment inwhich the individual feels inspired to grow and develop his/hercompetence.Furthermore, they say that individual organisations will not necessarilyberesponsible for the individuals’ competence development; it is rathertheindividuals’ responsibility to make sure that they develop theircompetencies inorder to attract future employment relationships. The ultimate situationis whenthe individual feels that the organisation provides the best resourcesavailablein order for them to grow and develop their competencies. Damm andTengbladalso argue that two very important future working areas, forindividuallyfocused personnel work, will be guidance consulting and employeebrooking.There will be a need for people who work with professional careerservice toassist the individuals with their career planning if the individual willberesponsible for their own careers. In a labour market that isincreasinglycharacterised by time limit employment rather than life long contracts,therewill be a constant requirement to link competence demand with competencesupply. The employee brokers can assist in the process of identifyingthedifferent potentials and overlapping between demands since they have abetteroverview than the individuals have. This could mean that it will stillbenecessary with employees working with personnel-related questions,however,much of the “strategic personnel work” will not be as important since
  20. 20. individuals will be responsible for their own competence development(Dammand Tengblad, 2000).Chapter 3 Theoretical Framework1 63.3 The Contemporary Purpose of HRPIn contemporary contexts, HRP can be a complex subject, especially in times ofrapid changes in the business environment, thus increasing the tensionsbetween the greater need for planning and the greater difficulties of prediction.It seems relevant to investigate what the organisational purposes underlyingthe planning of human resources are and also what the expected outcomes arefrom such planning. This section will present the contemporary purposesbehind HRP as argued by theory.Mullins (1996) argues that effective HRP can help anticipate potentialfuturedifficulties while there is still a choice of action. Forward planningshouldenable the organisation to develop effective personnel strategiesrelated to suchactivities as recruitment and selection, training and retraining,managementdevelopment and career progression, transfers and redeployment, earlyretirements, salary levels, anticipated redundancies, and accommodationrequirements.Bramham (1987) presents a more detailed view of six basic objectives,whichare quite similar to those mentioned by Mullins (1996) that are thoughttoconstitute the purpose of HRP.The first objective and a major purpose behind the use of HRP is to giveanorganisation a broad, forward-looking insight into not just the numberofemployees, but also the type, skills, and attributes of the people thatwill beneeded in the future. HRP provides the information on which recruitersbasetheir activities and it reveals what gaps there are between the demandfor and
  21. 21. supply of people with particular skills (Bramham, 1987; Storey, 1995;Mullins,1996).The second objective aims to reveal what training and developmentactivitiesneed to be undertaken to ensure that existing employees and new recruitspossess the required skills at the right time. The longer and morespecialisedthe training is, the more significant accurate HRP is to theorganisation’seffective operation (Bramham, 1987).Chapter 3 Theoretical Framework1 7Manpower costing is listed as the third objective and explains how HRPassistsin cost reduction by aiming to work out in advance how organisationaloperations can be staffed most efficiently. This is of even moreimportancewhen new ventures or projects are considered because it providesinformationon which to base vital decisions (Bramham, 1987).The fourth objective presented by Bramham (1987) is redundancy. HRP isanimportant tool in the anticipation of future redundancies and thereforeallowsremedial action to be taken, such as recruitment freezes, retraining,and earlyretirements so as to reduce the numbers involved.Another advantage associated with HRP, presented as the fifth objective,iscollective bargaining. In organisations with a strong trade unionpresence, HRPprovides important information for use in the bargaining process. It isparticularly significant when long-term deals are being negotiated toimproveproductivity and efficiency. In such situations, the informationprovided by HR
  22. 22. forecasts enables calculations to be made concerning how great anincrease inpay or how great a reduction in hours might be conceded in exchange formoreproductive working methods and processes (Bramham, 1987).The sixth and last objective presented as a purpose of HRP deals withtheplanning of accommodations, such as future need for office space, carparking,and other workplace facilities. Such considerations are of greatimportance,especially to organisations expecting fast expansion or contraction ofkeyoperations. As with the other five objectives described above, HRP alsohereaims at controlling costs over the long term by forecasting the future(Bramham, 1987).Chapter 3 Theoretical Framework1 83.4 The Case for and against HRPThis section starts out with presenting the theoretical arguments against HRP,followed by the case for HRP. We find it crucial to examine both cases in orderto have a balanced view in our attempt to analyse our findings in regards to theproblem focus.3.4.1 The Case against HRPConcerns raised about the feasibility of human resource plans focus onthenature of the human resource, the nature of the planning in an uncertainenvironment and the difficulty of implementing plans. Hussey (1982), inabook about corporate planning, argues that the human resource is farmorecomplex to plan for than financial resources. He comments on thecriticaldifferences between people, the difficulty of moving them around, thecosts ofover-staffing, and the importance of treating people as people and notaninanimate resource.
  23. 23. These concerns are not unique for only HRP but are problems found acrossalltypes of planning. Minzberg says (1994) that almost everything writtenaboutplanning stresses the importance of accurate forecasting. Short of beingable tocontrol the environment, planning depends on an ability to predict wherethatenvironment will be during the execution of the plans. Part of theproblem, ofcourse, is to predict what kind of change will come, let alone, predictthechanges in itselves. According to Allaire and Firsirotu (1989),uncertainty is thereal weakness of strategic planning.While most literature emphasis the essence of short and long term HRP(Bell,1989, Walker, 1992, Rothwell, 1994, Torrington and Hall, 1995), someauthorshave developed different arguments (Mintzberg, 2000, Smith, 1996,Untermann, 1974). These arguments are all based on the simplepropositionthat it is impossible to forecast the demand for and the supply oflabour withany accuracy. This case against the long term planning of humanresourcesseems to have more and more resonance as the business environmentbecomesincreasingly turbulent. Mintzberg (1976, 2000) has advanced this viewsaying,Chapter 3 Theoretical Framework1 9in practice, most forecasts turn out to be wrong and that, as a result,theplanning process tends to impede the achievement of competitiveadvantage.The underlying argument is that the new and more turbulent business
  24. 24. environment delivers far more discontinuities than the businessenvironmentdid during the 70s and 80s. Not only is the discontinuity difficult topredictitself, but there is also a whole set of problems associated withassessing itslikely impact on the organisation over time. As a result, except insituationswhere the organisation itself is able to exercise control over futuredevelopments, all forecasts are inevitably based on questionableassumptions.This could in turn mean that the preparations undertaken to meetinaccuratepredications might well cause greater harm to the long-term interests oftheorganisation than it would have if the organisation had taken a lessdefiniteview of unfolding developments (Mintzberg, 2000).Competitive advantage today, according to critics of strategic planning,comesfrom generating responses to fast-changing circumstances that areswifter, morecreative, more innovative and more flexible than those of keycompetitors –qualities that are stifled by the bureaucratic characteristics ofplanningprocesses (Smith, 1996). Mitzberg (2000) argues that planning itselfbreedsbasic inflexibility in organisations, and so a resistance to significantchange.Furthermore, Newman (1951) attributed the inflexibility of planning toseveralpsychological factors. Firstly, making the “executive feel too secureand thusinattentive to changes.” Secondly, “a tendency, having once prepared aplan, to‘make it work.’ Finally, “psychological resistance” due to theestablishment of
  25. 25. “mind-set” and fear of “loss of face” if plans are changed. Unterman(1974)after reviewing the popular “Stanford method” of strategic planningconcludedfrom his own consulting experience that “he has yet to see any drasticor majorcorporate revisions resulting from it.” Thus, it is claimed that, asthe world isincreasingly complex and unpredictable it is not worth trying to predictwhatwill happen more than a year ahead. Any plans that are made will, in alllikelihood, have to be revised several times in the light of changingenvironmental developments (Taylor, 1998).Chapter 3 Theoretical Framework2 03.4.2 The Case for HRPAccording to Taylor (1998) HRP involves considerable uncertainty, it isnot ascience, and mistakes are bound to occur. However, the use of HRP canassistorganisations to foresee changes and identify trends in staffingresources, andto adopt personnel policies, which help to avoid problems. The point isthatHRP has never been intended to produce blue-prints that determine thedirection that recruitment and development policy should take years toadvance(1998). Instead, it is viewed as a less deterministic activity, in whichplans arecontinually updated in the light of environmental developments.Tayor (1998) argues that in practice changes in the environment rarelyoccur assuddenly as Mintzberg (1994) suggests. As a result, when unforeseendevelopments do occur, there is time for plans to be adapted and updatedtoenable the implications to be met. However, Taylor stresses the pointthat
  26. 26. Mintzberg’s arguments concern business planning in general and are notrelatedto only the management of people. This means that Mintzberg’s argumentscould prove to be more valid from a general management perspective andmayhave less relevance to HRP.Taylor (1998) continuous to say that because the business environment isbecoming increasingly turbulent and unpredictable, due to the threatfrompotential discontinuities, there is an even greater need fororganisations todevelop the capacity to plan accurately. However, according to Hedberget al.(1976), an organisation should plan its future but not rely on itsplans. Plansand long-run goals allow an organisation to anticipate what will berequiredtomorrow, and the more realistic the organisation’s problem solvingprocessesare the more future scenarios they can accurately plan for (Vickers,1959).According to many authors (McNulty, 1962, Newman and Logan, 1955,Starbuck, 1965, Wickesberg, 1961), an organisation needs to havebalancedcriteria for developing plans and goals. Because every organisationfails topredict some events, extremely detailed plans or plans that areextending veryfar into the future waste problem-solving capacities and alsodiscouragesresponsiveness. Moreover, plans and goals are frequently too systematicandChapter 3 Theoretical Framework2 1rational, useful goals are somewhat unclear, and useful plans aresomewhatdisorganised, erratic and uncertain (Moore and Tumin, 1949; Schneider,1962).
  27. 27. A realistic organisation keeps itself ready to replace its plans andgoals in orderto match and exploit environmental unpredictability (Beer, 1972, 1974;Starbuck, 1965, 1975).Bramham (1988) argues that the modern manager must develop the systemsand controls, which increase the likelihood of the environment beingcontrolledto a reasonable extent. Without an accurate awareness of his position, amanager will quickly lose his way in this rapidly changing environment.Ineffect, what is being argued for is that it is both possible anddesirable to planfor uncertainty.According to Taylor, supporters to HRP suggest that in order to maximisetheorganisations’ profits in times of great uncertainty, organisationsshould planfor a number of possible outcomes. The aim of this would not be tofollow aplan rigorously but to create a flexible plan covering differentpossibilities,which can later be updated, as knowledge of the future environmentbecomesclearer. According to Torrington and Hall (1995), the balance betweenvisioning and planning will be different depending on the environment.In ahighly uncertain environment the emphasis needs to be put on thevisioningprocess, and where things are slightly less chaotic, planning has agreatercontribution to make. Plans need to be viewed as flexible and reviewedregularly, rather than seen as an end point in the process. They furtherarguethat plans should not be seen as isolated events, but rather somethingthat has tobe continuously monitored, refined and updated. Walker (1992) arguesthat
  28. 28. human resource plans are becoming more flexible and short-term, with aclearfocus on human resource issues, simpler data analysis and an emphasis onaction planning and implementation.Manzini (1984) claims that in spite of the difficulty of developing aplan,imperfect though it may be, will generally get us closer to the targetthan if wehad not planned. Taylor (1998) argues that to achieve maximum potentialcompetitive advantage, HR planners need to ensure that they havecommittedpeople with the right skills to exploit whatever opportunities arise.Further, it isChapter 3 Theoretical Framework2 2therefore the uncertainty that provides the rationale for increasedattention tothinking ahead.3.5 Techniques for Managing Supply and Demand of CompetenceAs HRP to a great extent is concerned with the planning of competence, thissection will examine some aspects on the supply and demand issue ofcompetence that are brought up in theory.An ideal type feature of HR management is the assumption of adevelopmentalapproach to employees, which appears to imply some form of systematicmanagement of the assessment and augmentation of their ability, inrelation tobusiness needs. Moreover, the other major feature or output of the HRmanagement model is the emphasis on commitment to the goals of theorganisation, in which techniques of reward and career development mayplay asignificant part, and for which HRP may be important (Rothwell 1995).Some awareness of the techniques available is important for appropriatepolicychoices to be made. According to Taylor (1998), HRP is principallyconcernedwith assessing an organisation’s position in relation to its labourmarkets and
  29. 29. forecasting its likely situation in years to come. Estimates of supplyusuallystart from a scan of the external environment. Either to get a feel forthe likelytrends and changing patterns of skill availability for the establishedcompany,or to serve as a more precise guide for a start-up firm or one seeking anewlocation. It can also be of assistance when recruiting a particular typeofemployee where more detailed information is needed. Taylor (1998)furtherargues that details of education, skill and experience, though notalways easy toacquire, are more straightforward than those of attitude, which may bemoreimportant in human resource terms. Information on this may derivelargelyfrom stereotyped hearsay, but can be more accurately assessed throughappropriate recruitment techniques (Taylor, 1998).Rothwell (1995) argues that data on the internal supply of labour aremuchmore readily available, in terms of age, job history, pay andconditions,qualifications, sex, race, etc. Information on attendance, disciplineandperformance may also be available, where relevant, and as the result ofotherChapter 3 Theoretical Framework2 3forms of assessment. From these data, predictions can be made of likelystaffing levels and of retirement patterns by projecting forward currentageprofiles by three years, five years, or ten years, to see if they matcha normaldistribution curve, external population trends, or any other preferredpattern.Although this represents the simplest planning technique and can help to
  30. 30. indicate likely forthcoming shortages, cost savings, or successionproblems,such projections are neglected surprisingly often (Rothwell 1995).The unknown aspect of internal supply is the weakness of all human assetaccounting, the fact that people choose to leave. Certain patterns aregenerallyknown, such as that young people are more likely to leave than older,andpeople in low-level rather than responsible jobs. Increased levels ofabsenteeism may be a sign of impending dissatisfaction and intention toleave,but may also demonstrate patterns of workplace culture or managerialcontrolsystems (Edwards and Whitson 1989).Estimation of internal labour demand, although apparently easier, isfrequentlythe more difficult aspect, in view of many uncertainties of recessionand therapid changes that are taking place. Turbulence in the product or marketenvironment may be the norm now, even for public sector organisations,whichare increasingly subject to privatisation and market testing, as well asin manysmaller businesses where once apparently stable markets were found(Taylor,1998).The ability of HR managers to predict accurately how many people will berequired and with what skills depends on a number of factors. First,there is thetime-scale that the forecast is intended to cover. Except in the mostturbulent ofenvironments, it is possible to look forward one or two years and makereasonable assumptions about what staffing requirements will be. It getsfarharder when time-scales of three, five or ten years are contemplated.This isbecause relevant technological or economic developments that will have a
  31. 31. profound effect on the level and kind of activity carried out by theorganisationmay not yet even have been contemplated (Taylor, 1998).The other major variable is the nature of the activities carried out bytheorganisation. Organisations in relatively stable environments are abletoChapter 3 Theoretical Framework2 4forecast their needs with far greater confidence than organisationsoperating ininherently unstable conditions (Taylor, 1998).Storey (1995) argues that there are different approaches to forecastingdemand;most mathematical and statistical techniques used in demand forecastingareconcerned with estimating future requirements from an analysis of pastandcurrent experience. A number of distinct approaches are identified intheliterature; including time series analysis, work study and productivitytrends.Time series or ratio-trend analyses look at past business patterns andthenumbers of people employed in different roles to make judgements abouthowmany will be required to meet business targets in the future. Such anapproachis straightforward and thus only suitable in relatively stable businessenvironments. The work study approach has a different basis. Here,instead ofassuming that the ratio of business to staff will remain broadlyconstant, specialstudies are undertaken of individual tasks or processes carried out bytheorganisation in order to establish the numbers required to complete themmost
  32. 32. effectively and efficiently. The method is thus suitable in situationswhere thereare no clear trends in the past to examine (Rothwell, 1995).A rather different approach to forecasting demand, presented by Rothwell(1995), is to base forecasts on the subjective views of managers aboutlikelyfuture human resource needs. Clearly, in situations where the businessenvironment is highly volatile and where future staffing patterns maywell bearlittle resemblance to past experience there is no alternative to usinginformedopinion as a basis for estimates (Rothwell, 1995).Chapter 3 Theoretical Framework2 53.6 External and Internal Influences on HRPAs argued in the theory presented earlier, the increasingly turbulent and morefast-changing business environment is affecting the ways in which today’sorganisations conduct HRP. It is therefore of interest to investigate morespecifically what not only the external factors are but also the internal factorsinfluencing HRP.3.6.1 External Influences on HRPA lot of things have changed from when HRP first gained widespreadpopularity. The stability of the smooth sailing years, as Champy (1995)refersto the age of US corporate domination between 1948 and 1973 is gone.Today’s dynamic environment, filled with global competition andbusinessdiscontinuities, define the arena in which HRP must flourish. The needforanalysis of changing scenarios, therefore, has to be an integral part ofthe HRPprocess (Rothwell 1995).The first step in HRP is usually the “environmental” scan. If thisreview has notalready been carried out in some depth as part of the formulation ofcorporatestrategy, consideration of critical trends may be a major contribution,which theHRM function can make to the organisation (Institute of Personnel
  33. 33. Management 1992).The growing internationalisation of business in the face of changingpatterns ofworld trade, the emergence of new competitors and new markets andchangesin the older industrialised countries, all have some impact on thelabourmarkets of even the smallest firm trading in national market (Taylor,1998).Most larger and medium-sized companies are, however, likely to betradinginternationally (Rothwell 1995) in some way and will need to understandthelabour markets in those countries, if they are to recruit staff abroador if theyexpect to send their own staff to work there. The whole issue ofinternationalmanagement development has major implications for strategic planning andforhuman resource forecasting and implementation. Evidence so far suggeststhatChapter 3 Theoretical Framework2 6there are many inadequacies in both planning and implementation ofmanagement mobility, and that there is a widespread reliance on ad hocuse ofexpatriate managers (Ibid. 1995).International and political issues are clearly closely linked, the movetowardsgreater European unity, the unification of East and West Germany, theopeningof Eastern Europe, The World Trade Centre bombings etc., are just a fewexamples of events with implications for business planning. Thepoliticalcomplexion of a government tends to affect the type of economic policyinplace, the attitude to full employment, trade union and employee rights,as well
  34. 34. as the level of support for private or public sector enterprises.External politicalfactors, especially the broader social and regulatory legacies ofindustrialrelations, provide a socio-political context in which managerialstrategies havehad to develop, and by which they have been conditioned (Lucio andSimpson1992). At a time of economic recession in particular, the costs ofworkerprotection policies can be very costly for companies.Rothwell (1995) argues that an awareness of population trends iscritical inunderstanding labour markets, and national population statistics arereadilyavailable. Rothwell further states that planning to take account ofdemographictrends is not often done early enough. Also, a lack of advance planningtends toincrease labour costs, as firms have to increase wages and salaries inorder toretain staff or poach them from other firms.Public policy emphasis on training, the co-ordination of a plethora ofnationalvocational qualifications, and the setting of national educationtraining targetsall mean that some aspects of estimating external competence supply willbeimproved. Data on graduate qualifications are readily available, butinterpretinglikely trends in supply and demand is complex (Pike et al. 1992).Demand-side factors stem mainly from business strategy, but need to takeaccount of other skills that may be needed; for example in physicalenvironmental awareness and the implications for products or processesandenergy use; or in marketing, in concepts of relational marketing,customer
  35. 35. education and general supply chain management. If mergers oracquisitions areexpected, is new expertise needed to handle that? Or if organisationstructuresChapter 3 Theoretical Framework2 7are changing to create flatter organisations or new internationalisedbusinessmarket divisions, are there skills available in managing networks,managingprojects or managing cross-culturally? Firms that use competence-mappingtechniques may be able to provide data relevant to HRP, but where theseactivities are done by different people and/or at different locations,such linkagecannot be made (Rothwell, 1995).The implications of new technology have been the object of intensiveacademicand policy debates for the last twenty years. The speed of recent changehasbeen such that the applications of computerised technology in productsandprocesses are now driving and facilitating much of the market, as far astheorganisational and communication changes that are taking place. Thescope forsubstitution of labour by capital, and the need for more creative andmorerelational uses of human skills, particularly those involvinginterpersonalrelationships and the ability to relate ideas laterally, is growingconsiderably inmany countries, industries and companies. The implications for numbers,skills,location and design of jobs and employment contracts are therefore moresignificant than is currently realised by many HR managers. Thosemanagersare often too busy coping with the cost-cutting redundancies arisingfrom what
  36. 36. appear to be largely cyclical economic effects, but which may also becausedby real structural changes now taking place in employment (Rothwell1995).Consumer attitudes tend to be surveyed more regularly than those ofemployees, but shifts in employee preferences are perceptible, often onageneration basis. The generation of people born in the 70s and 80s aremoreindividualistic, less likely to accept authority, expecting to have asay and begiven a choice, and also to be putting more emphasis on quality ofleisure andfamily life. The priority perks for those in work are those related tohealth andto education and training. Employees are also less likely to remain withoneemployer. These attitudes are found particularly among “knowledge-workers”,and may be modified over-time by experience of recession and widespreadwhite-collar unemployment (Rothwell, 1995).If a major difference between HRP and manpower planning lies in itsemphasison motivating people (Bramham 1989), understanding the starting pointandchanging the direction of employee attitudes could become moreimportant.Chapter 3 Theoretical Framework2 8The incorporation of both individual and organisational needs istherefore themajor challenge for HR planners and should be reflected in theapplication ofthe planning process to the ways in which people are employed (FernerandColling 1991).3.6.2 Internal Influences on HRPZeffane and Mayo (1994) argue that in the context of the supply-demand
  37. 37. equation, a range of internal factors require consideration for thepurpose ofevaluating existing (or anticipated) supply from within theorganisation. Thesupply side issues that HRP should address include the organisation’spolicy ongrowth from within or by means of outside recruitment; the policy on payandremuneration, and the organisation’s view on employee development. Inthiscontext, the conventional human resource plans take into consideration aseriesof supply side statistics, such as company growth, the age distributionofemployees, skill levels, turnover ratios and the overallprofile/distribution ofemployment across job categories. Zeffane and Mayo (1994) further statethatamong all these, age and retirement are emerging as importantconsiderations inworkforce planning in the current socio-economic climate. These factors(i.e.age and retirement) are strongly related in the sense that retirementtakes placeon the attainment of a certain age. Catering for age is necessary and isbecoming increasingly the subject of a more elaborate mathematicalmodellingfor workforce (Mohapatra et al. 1990). Additionally, HRP has to takeintoconsideration the total corporate plan, which would incorporate, set outoranticipated productivity standards (Wilson, 1987).The more contemporary approaches to HRP need to consider current (andanticipated/future) changes in the make-up and aspirations of theworkforce.Long-term macro-level forecasts seem to suggest that people in thefuture will
  38. 38. have even greater desire for self-development and discovery (Taylor,1998).These aspirations may trigger requirements for changes in existingcorporatestructures and management systems. As a result, human resourceprofessionalsand their organisations may capitalise on the advantage of potentialemployeeswho may be creative and self-motivated, but they will also face theproblem ofdeveloping an environment that will attract and hold such individuals(Taylor,1998).Chapter 3 Theoretical Framework2 93.7 Different Types of Human Resource PlanningIn the light of different aspects concerning supply and demand of competenceas well as different factors influencing HRP, this section will present variousmethods for carrying out HRP. The aim of this section, combined with relevantfindings, is to provide a sound foundation on which we can base the answer tothe second research problem. In other words, is the choice of HRP methodinfluenced by business cycles? Also, are the methods presented in theoryrelevant to organisations as of today?3.7.1 Succession PlanningOne adaptation of traditional HRP that takes place mostly in largerorganisations is the development of a succession planning function.Storey(1995) argues that chief executives often see this function as the majorrationalfor any form of HRP. While in some organisations it may be focusedmainly onthe few top positions, the need to consider at least a five-year-periodcan meanthat it becomes a more significant operation, and eventually drives awholemanagement recruitment and development programme. According to Taylor(1998), succession planners are mainly interested in ensuring that theiremployer has enough individuals with the right abilities, skills andexperience
  39. 39. to promote into key senior jobs, as they become vacant. According toJacksonand Schuler (1990), succession planning differs from traditional HRP inthesense that the succession planning process covers a narrower group ofemployees but does so with a higher degree of intensity. As successionplansconcern relatively few employees, they can be considerably moresophisticated.The time span is also longer than that of traditional HRP. Successionplansoften involve forecasting and planning the progress of individuals 20yearsahead or more (Walker, 1992, Storey, 1995).Storey (1995) argues that succession planning is most often associatedwithhierarchical organisations in which individuals develop careers bymovingupwards and sideways over a number of years as they acquire the requiredskills and experience. The aim of this is to ensure that enoughindividuals withthe potential to succeed to senior positions are available when anappointmentChapter 3 Theoretical Framework3 0needs to be made. Rothwell (1994) states that three candidates aretypicallyidentified for each senior post: one who is ready now and could succeedimmediately if necessary; one who will be ready, if needed, in two orthreeyears’ time and one who will be ready in five years’ time. Taylor(1998)comments, in addition, succession planners have an input into decisionsaboutthe numbers of graduates that are employed on graduate trainingprogrammeseach year. In technical terms, succession planning involves collectingand
  40. 40. manipulating data about individuals and tracking their performance andprogress as they move from job to job over a period of time.3.7.2 Career PlanningThis type of HRP is by some viewed as a more fashionable term to usethansuccession planning and ostensibly is more individually focused (Storey,1995).Furthermore, like succession planning, broadly interpreted, it requiresanunderstanding of processes that can integrate an individual’scharacteristics andpreferences with the implications of: organisational culture, values andstyle,business strategy and direction, organisational structure and change,rewardsystems, training and development system, appraisal and promotionsystems.According to Taylor (1998), career planning emphasises much more on theindividual’s responsibility for his/her own career development.‘Mentoring’and ‘coaching’ systems, whether formal or informal, may be introducedtoassist in this. Storey (1995) argues that common problems associatedwith thiskind of planning are related to key people leaving, or to managers’lack ofbroad experience. The requirements of different types of organisations(static;fast growing; international etc.) for detailed planning clearly vary(Ibid). Storeyfurther states that the need for creating ‘bridges’ between differentoccupationsand for the identification of ‘development positions’, are bothsignificanttechniques in career planning. The predominant influence of this type ofplanning is that of the organisation’s needs, as interpreted byparticular
  41. 41. managers, at certain phases of its development and it is said thatcareerplanning may be interpreted very differently by those who experience it(Storey, 1995). Storey continues to say that the ‘myths’ of theorganisation inthis sense may also be significant: “those who decode themappropriately arethose who obtain advancement.”Chapter 3 Theoretical Framework3 13.7.3 Contingency PlanningContingency planning is seldom given any attention by authors within theHRfield, but according to Taylor (1998), it can be seen as an approachthat isalmost universally applicable. Contingency planning involves planningpossible responses to a variety of potential environmental scenarios,and theresult is that HRP effectively switches from being a reactive processundertaken in order to assist the organisation in achieving its aims.Taylorfurther argues that it becomes a proactive process undertaken prior totheformulation of wider organisational objectives and strategies. The mainpurpose of contingency planning in the HR field is the provision ofinformationon which decisions about the future directions the organisation takesare made(Taylor, 1998).3.7.4 Competency PlanningAnother adaptation of traditional HRP is skills planning and is,according toSpeechly (1994), particularly appropriate in situations where there is avarietyof different methods by which employee needs can be met. The basicprincipleof this method is to shift away from a focus on planning for people andinstead
  42. 42. concentrate mainly on skills. Taylor (1998) argues that instead offorecastingthe future supply of and demand for employees, skills planning involvespredicting what competencies will be needed one to five years ahead,hence,leaving open the question of the form in which these will be obtained.Further,skills-based plans incorporate the possibility that skills needs are tobe meteither wholly or partially through the employment of short-termemployees,outside consultants, as well as by permanent members of staff (Taylor,1998).3.7.5 Soft Human Resource PlanningThere has been some disagreement in the literature over the term ‘softhumanresource planning’ and its perceived meaning (Taylor, 1998).Marchington andWilkinson (1996) give one broad definition as being ‘synonymous withthewhole subject of human resource management.’ Torrington and Hall (1995)have a narrower definition involving planning to meet ‘soft’ HR goals–Chapter 3 Theoretical Framework3 2particularly cultural and behavioural objectives. Torrington and Hallalso usethe label to give meaning to a distinct range of HR activities which aresimilarto hard HRP in approach, but with a focus on forecasting the likelysupply anddemand for particular attitudes and behaviours rather than people andskills.According to Taylor (1998) soft HRP can thus be seen as a broadening oftheobjectives associated with the traditional approaches of HRP. Soft HRPaccepts
  43. 43. that for organisations to succeed in the current environment they needmorethan the right people in the right place at the right time. In order tocontribute tothe creation of a successful organisational culture, they also need tomake surethat people have an appropriate outlook and set of attitudes. Further,even moreessentially argued by Taylor, by undertaking systematic soft HRPorganisations will be alert to long-term shifts in attitudes to workamong thelabour force in general, allowing them to build these considerationsinto theirgeneral planning processes. Such issues are not taken into account bytraditional HRP according to Taylor (1998).Chapter 4 Summary of Empirical Findings334. Summary of Empirical FindingsIn this section, the empirical findings that have been collected from thecompanies studied are presented. Each case study starts out with apresentation of the organisation, in which we will briefly describe theirindustries, whether they have an international presence or not and the size ofthe company in terms of employees. These are factors that we consider relevantto our analysis. However, due to recent turbulence in some of the industriesthat we have analysed, non-static information such as number of employeesmight have changed dramatically by the time of print.4.1 EricssonEricsson was established in 1876 and is the largest supplier of mobilesystemsin the world with a global presence in more than 140 countries. Ericssonis aSwedish company and their head office is located in Stockholm, Sweden.Atthe time of this research, Ericsson had around 70,000 employeesglobally, withapprox. 40,000 in Sweden.Reasons, Motives and Approaches to HRPHRP at Ericsson consists of two main planning processes. One process isa
  44. 44. short-term forecast that runs quarterly, stretching a year into thefuture. Theother process is the long-term planning process, internally known asEricssonStrategic Planning (ESP), constituting the general business strategy andstretches three to five years ahead. The ESP is done annually andincludes ascenario part in which the organisation is looking at social trends inorder tocome up with a few potential futuristic scenarios. Another part of ESPconcernsplanning of personnel and competence, in which they plan for competenceneeded in the future, based on the technique required for producing thedesiredproducts.At times when the telecom industry is in its ‘normal’ condition,without suddenand unpredictable shifts in the market, HRP consists of more or less thesamemodel and progresses as it did ten years ago with one exception,today’s shortercycles increase the speed of change.Chapter 4 Summary of Empirical Findings3 4The people involved with HRP at Ericsson are top managers, responsiblefordecision- making concerning long-term planning, and business unitmanagerswith the responsibility for short-term planning, such as recruitmentrequirements.In order to reduce subjectivity in the recruitment process and HRP, thetopmanagement at Ericsson communicates a certain process that is to befollowedwherever in the organisation the recruitment is taking place. Thisprocessimplies that at least three persons are to be involved with equaldecisionmaking
  45. 45. power. A committee has been established in order to ensure that anumber of objective aspects have been considered before a managementposition is filled. This committee consists of the deputy managingdirector, theHR director, and the person responsible for management support globallyand afew business unit managers.Ericsson is working after the Balanced Scorecard (BSC) concept in ordertofacilitate the linkage between HRP and the general business strategy.The BSCimplies that employee issues are considered throughout the organisationandthat, among each manager’s goals, there is always one goal connected toemployees. Great emphasis is put on the linkage between HRP and thebusinessstrategy, but according to Ericsson, it is difficult to plan for HR morethan threeyears ahead, thus reducing the linking ability somewhat. However, HRconstitutes an equal share of the general business planning on a threeyears timespan as does technique or sales.Ericsson’s motive behind HRP lies in the planning process and not inthe actualplan. The essence of HRP is to leave the daily work for a while bylooking atthe situation from a wider perspective. This enables them to betterunderstandthe surroundings and competitors, which in turn create a sound platformonwhich Ericsson can establish more accurate forecasts about the future.Thus,the planning process contributes more value to the organisation than thenumbers in the final HR plan. The motive for having a scenario-based HRPisalso to prepare for alternative ways instead of rigorously following amainscenario.
  46. 46. Chapter 4 Summary of Empirical Findings3 5Ericsson argues that flexibility is a necessary ingredient in times ofgreatuncertainty with rapid changes in the business environment and when theorganisation is having difficulties to plan with accuracy. Flexibilityis achievedby freezing less internal costs regarding assets such as facilities,equipment,and personnel, in order to untie capital that may be invested elsewhereuponsudden need. According to Ericsson, it can be devastating, in times whenthemarket is unstable, to follow a plan rigorously without any flexibilityand toavoid such inflexibility they use a scenario planning approach.In connection to the annual overview, Ericsson carry out a scanningprocess toanalyse the business environment, the world economy, political trends,andrelevant industries. The HR department does its own environmentalscanningon an annual basis and look at factors such as shifts in people’svalues,different trends, and evaluating the market according to customers andtheworld economy. These factors are all considered in the planning process.As a global company, they are affected by a variety of laws andregulations. Inorder to map the potential affects they may have on the HRP process,theselaws and regulations are under continuous coverage. Ericssonspecificallyraises the problematic issue of retaining the latest and often mostrelevantcompetence when dealing with the regulation “last in first out.”Ericsson has the same HRP routines in times of downsizing as they havein
  47. 47. times of growth and expansion. They say that to plan ahead does notnecessarily mean to plan only for expansion and growth. Operating insuch aturbulent environment as today’s telecom industry, it is necessary toplan forreductions and new competencies when inventions of new techniques havethepotential to make special competence within Ericsson obsolete.External and Internal Influences on HRPAccording to Ericsson, the HR department is involved more in times ofgreatgrowth, when competence requirements are shifting, during extensiverecruitments and in times of competence development, than it is in timesof lessfluctuation and change. Ericsson argue that due to their core values(professionalism, human compassion, and long-term planning1), they areless1 Own translation of Ericsson’s core values: professionalism, medmänsklighet och långsiktighetChapter 4 Summary of Empirical Findings3 6sensitive to economic fluctuation compared to other organisations and nomatter economical climate, the HR department is of equal value to theorganisation. In other words, the short-term planning is affected by thelongtermplanning.The gap between supply and demand for competence is clearly a problemthatEricsson is aware of. In their attempt to reduce the gap and in order toinfluencepotential employees’ attitudes toward Ericsson as an employer they worktogether with different schools and organisations, such as SvensktNäringsliv.According to Ericsson, the current recession in the telecom industry islikely tohave a negative impact on students’ attitude towards the engineeringprofession.The fluctuation in the world economy and political decisions world-wideaffect
  48. 48. Ericsson to a great extent. For example, the decision to impose taxes ontheorganisations within the telecom industry by assigning a fee to licensesmeansthat Ericsson and other telecom companies have to make extensiveinvestmentswith long payback time.The employee turnover at Ericsson is strongly affected by the economicclimate. In an economic recession the employee turnover rate is low andviceversa. The turnover rate also differ from one country to another. AtEricsson’sfacilities in San Diego, USA the employee turnover rate is normallybetween10 to 20%, while in Sweden it varies between 1.9-8%. This can beexplained bythe fact that Americans tend to be less loyal to the organisation thantheSwedish employees. In China with its central governing system, theemployeeturnover rate is constant at 1-2%, thus the rate is not affected byeconomicclimate at all. Ericsson can see some changes in behaviour fromgeneration togeneration but it is merely trends and no radical shifts. Ericsson saysthat thereason why the level of employee loyalty stays constant throughoutgenerationsis that each generation has the same need for safety and certainty intheir lives.However, the IT trend a few years ago did increase the employee turnoverfor awhile, but according to Ericsson, does not affect a whole generation’sattitudetowards loyalty.Chapter 4 Summary of Empirical Findings3 7
  49. 49. Technical developments such as automation and IT are factors thatclearlyaffect HRP at Ericsson. The mobility of employees is seen as animportant partof making the organisation flexible. Ericsson is therefore working withthedevelopment of more sophisticated networks that enables their employeestoperform their work outside the office. Ericsson believes that themobility ofemployees is a trend that will stay and therefore worth investing in.Other external factors that affect the HRP process are the market andthecustomers. The internal factors such as organisational size and acomplexstructure have greater influence on the planning process and make itmoredifficult to plan than the external factors.Ericsson believes that in the future it will be increasingly importantto haveemployees with social competence as well as other generic competenciesacrossthe organisation.4.2 HandelsbankenHandelsbanken is a Nordic universal bank that offers all kinds ofserviceswithin banking for both companies and private persons. Handelsbanken isaSwedish company, established in 1871 and the head office is located inStockholm. Handelsbanken has about 540 offices in the Nordic region and7subsidiaries. Outside the Nordic region the bank is represented innearly 20countries. At the time of research Handelsbanken had around 9,200employeesglobally and the western region had about 750 employees.Reasons, Motives and Approaches to HRPAccording to Handelsbanken they try to keep the organisation as tight as
  50. 50. possible in order to avoid recruitments and redundancies. They believethat thebanking industry will require fewer employees in the future; however,this isnothing that Handelsbanken plans for which means that they do notconductlong-term HRP. They argue that this type of long-term downsizing willtakecare of itself. Handelsbanken has dealt with HRP in this manner sincethe early70s.Chapter 4 Summary of Empirical Findings3 8Handelsbanken say that long-term HRP is very difficult to conduct andthey donot see any major reason for practising it and are therefore very ad hocin theirHRP. However, one of the core values in the organisation is long-termthinking, which is also relevant to employees and competencies. Thismeansthat some long-term HRP is considered even though there is no formalplan forit. The prediction that there will be a demand for fewer employees inthe futureis believed to be a result of improved IT and more competent personnel.Yet, itis merely a prediction and Handelsbanken does not plan for it and arguethatonce they get there, they assume they will employ the right people withtheright competencies.According to Handelsbanken, it is up to the office manager to decidewhomhe/she wants when recruiting internally. However, when recruitingexternally itis the top management that makes the first selection even though it isthe officemanager that makes the final decision.
  51. 51. Handelsbanken states that they have certain recruitment criterias, forexampleall employees are required to have a university degree. They also statethatevery vacancy is advertised internally so that everyone has the samechance toapply for the job. In their attempt to avoid redundancies, Handelsbankentriesto restrict the redundancies to temporary workers only. Until today,Handelsbanken say that they have never discharged anyone due to the lackofworkload, which means that they have a very low employee turnover rate.According to Handelsbanken, the HR department works closely with theregional offices, which could be seen as a way to link the HR strategywith thebusiness strategy. However, as there is no planning for HR evident inHandelsbanken, this linkage appears to be vague.4.3 McDonald’s – SwedenMcDonald’s is one of the largest restaurant chains in the world, andhas approx.230 restaurants in Sweden. The Swedish head office is located inStockholmand has about 250 employees and the total workforce in Sweden amounts toapprox. 12,000. McDonald’s business idea is to offer a fully developedbusiness concept to approved franchisees.Chapter 4 Summary of Empirical Findings3 9Reasons, Motives and Approaches to HRPMcDonald’s develops a HRP that reaches three years ahead and isreviewedquarterly and annually. Much of the HRP work at McDonald’s is focusedoncareer planning and succession planning in order to develop individualplansfor the employees. According to McDonald’s, the HR work consists mainlyofeducation and development and they say that it is impossible to lookfurther
  52. 52. than three years ahead.HRP at McDonald’s has taken a drastic change compared to what it usedto bein the past. McDonald’s did not have an HR function up until 1994. In2001,McDonald’s added a leadership program to its HRP with the motive toretainleaders within the company. Before the start of this program there werenodescriptions or qualification criteria expressed for any of thepositions in theorganisation. Since the start of the program the turnover rate ofleaders hasdecreased considerably. McDonald’s argues that the leadership programcanexplain the reduced turnover rate, as today’s leaders are able toforecast theirfutures within McDonald’s.The HRP work and the recruitment process involve a top management teamconsisting of four people and a lower level management team consistingof tento fifteen people. Each business unit manager leaves proposals based ontheirbusiness unit’s needs, both for recruitment and the overall work forHRP. Therecruitment work is to some extent influenced by the head office inChicago,USA. For example, the Chicago head office decides how many employees theSwedish head office should have.McDonald’s use different support instruments such as job profiles,developedby an outside expert, in their attempt to minimise subjectivity in therecruitmentprocess. However, the continuous and most of the time sub-conscious work(the evaluation of an employee’s daily work by his/her manager) withfindingpotential successors to leadership positions is to a great extentinfluenced by
  53. 53. subjectivity, but it is not perceived as a problem.At McDonald’s, the linkage between the general business strategy andHRP isscarce, if any linkage at all. The competences profiles that are used intheChapter 4 Summary of Empirical Findings4 0recruitment process are purely based on today’s reality and are notaffected bythe three-year plan.According to McDonald’s, the purpose of HRP is to achieve a morecompetentworkforce and to retain employees, especially leaders, by developingcareerplans for everyone in the organisation. McDonald’s say that, this planshouldbe presented as career possibilities and then provide the environmentthatfacilitates those possibilities. By doing this, the employee isresponsible forhis/her own careers.McDonald’s argue that it can be dangerous to follow a plan rigorously.Theyrevise the three-year HRP annually and sometimes even quarterly in ordertoupdate and adjust the plan according to changes and current conditions.According to McDonald’s, it is difficult to say whether or not it ispossible tomeasure the outcomes of the planning. However, it is possible to measurethereturns on investments made in the HR work and they are currentlydevelopinga system that measures the outcomes/returns from such investments.McDonald’s scans the business environment annually by looking at trendsinthe society and the world economy in order to analyse customerpurchasingpower and recruitment opportunities. The market department does all the
  54. 54. research and therefore the HR department must leave a proposal to themarketdepartment if they want any research for their own account to be carriedout.External and Internal Influences on HRPWhen planning for HR, McDonald’s has to consider laws and regulations,especially those concerned with redundancy. McDonald’s argue that it iseasierto plan for HR in the USA than it is in Sweden where stricter laws andregulations must be considered.The HR department at McDonald’s achieves less attention and finds itmoredifficult to motivate investments in soft resources (human capital) intimes ofeconomic recession compared to times of economic boom. According toMcDonald’s, this is due to the difficulty of measuring economic returnon softChapter 4 Summary of Empirical Findings4 1investments. They therefore make efforts to develop a program thatenablesthem to measure the economic return on soft investments.McDonald’s recruit most of their leaders internally and their ownbusinessschool, to some extent, reduces the gap between supply and demand forcompetence. They conduct appraisals with their leaders regarding careerplansin order to retain as many leaders as possible.According to McDonald’s, external factors such as worldwide politicalincidents have little impact on the HRP process. However, being thegiantwithin the restaurant industry often means that McDonald’s receives alot ofattention when critique towards the industry is given in media. Theeconomicalclimate almost has a reverse effect on McDonald’s; in an economicrecession
  55. 55. people tend to increase their purchase of fast food. Customers’purchasingpower and behaviour also differs depending on geographical locationwithinSweden and this is something that McDonald’s take into account whentheyplan ahead.McDonald’s argues that the attitude among employees regarding loyaltytowards the employer has changed a little. Job-hopping has become atrend andMcDonald’s turnover rate of leaders has increased significantly eventhough itdecreased somewhat when they introduced their leadership programmes in2001. However, McDonald’s believe that the lack of career plans forMcDonald’s leaders before 2001 is the greatest contributor to theincreasedemployee turnover rate.According to McDonald’s, IT has had a great impact on HRP and made itpossible to develop a recruitment and succession system that trulyimproves theplanning of human resources.4.4 Mölnlycke Health CareMölnlycke Health Care is one of the worlds leading manufacturers ofsingleusesurgical products. The company also has a strong international standinginthe professional wound care sector. Mölnlycke Health Care hasapproximately4,000 employees. Of these, about 3,300 are involved in production atfactories.Chapter 4 Summary of Empirical Findings4 2Mölnlycke was established as an independent company in late 1997 throughanacquisition and merger of the respectively clinical divisions of theSCA/Mölnlycke Group in Sweden and Tamrå OY in Finland. The head officeis located in Gothenburg, Sweden.Reasons, Motives and Approaches to HRP
  56. 56. HRP is considered to be very important at Mölnlycke and is one of theirstrategically most important key questions. This means that they try to,as far aspossible, handle their global strategic key positions according to aplan. MHCdoes this in order to have employees ready to replace positions and stayalert.The strategic plan stretches three to five years ahead, however, it iscontinuously revised, at least once a year, in order to be flexible,react tochanges and competence requirements.According to MHC, the HRP today is different compared to ten to fifteenyearsago. The current business environment is much more turbulent with rapidchanges and they do not have as much time to plan as they did in thepast.Furthermore, MHC is today an international company, which means thattheyhave more fluctuations within the company and therefore have to be moreflexible today and understand these forces.According to MHC, it is the top management group that has the mainresponsibility for the strategic HRP questions. However, everydepartment andline manager works continuously with this process. The different marketcompany’s have meetings which they call organisational managementreviewswhere they discuss issues such as key positions, what they are, who arein thosepositions now and possible candidates to replace these employees.According to MHC it is easy to become subjective in the recruitment andplanning process and it is therefore important to have many personsinvolved inthe selection process. Even though it is the manager who has the overallresponsibility for the selection process, more people are involved. Forexample,the HR department, especially when discussing key positions, oftenconductssome sort of an analysis with external support in order to get as many
  57. 57. parameters as possible. MHC argues that it is easy to avoid subjectivitywhenchecking the formal merits of candidates but the personality ofcandidates is aChapter 4 Summary of Empirical Findings4 3subjective judgement and this is why MHC tries to have many peopleinvolvedin the process.MHC argues that it is up to the HR department, which is a supportresource, tocontinuously synchronise its strategies with the overall businessstrategy. Thetask for the HR department is to let the organisation know theconsequences ofa certain business decision from a personnel point of view. This isconsideredimportant, when the company decides to expand. It is then up to the HRdepartment to inform whether or not it is realistic to grow so rapidly,what theconsequences are, how much the company has to recruit and if it ispossible toget the necessary competencies required in the country in mind.According toMHC it is important that HR is represented in the top management groupanddoes not report to some administrative unit because then the HRdepartmentwill lose its influence.According to MHC, the general purpose for conducting HRP is to be readyforchanges and movements within the organisation so that you always havesomeone to replace vacancies.MHC’s plan is to be able to appoint 75% of all key positions withinternalresources but also believes that it is important to recruit externally.Anothergoal according to MHC, is to be able to assist employees in their career
  58. 58. planning so that they can control the succession planning and it isthereforeimportant to have some sort of agenda. By having an agenda, they havebetterprerequisites and it is the reason why they run their leadershipdevelopmentprogrammes continuously since it is a part of the process to get thesuccessionplanning to work.MHC do not feel that they loose flexibility by planning, on the contrarytheybelieve it is important to conduct HRP to stay flexible and get theknowledgeand understanding of how reality looks like. However, they do notbelieve it ispossible to plan after a strict system because it will fall apart fairlysoon sincethe reality and human being do not fit into these strict systems.Employees havea free will and will act from that. The reason behind planning should betorealise where you have the gaps and what competencies- and investmentsondevelopments are required to move ahead.Chapter 4 Summary of Empirical Findings4 4By having the goal to appoint 75% of key positions with internalresources, it ispossible for them to measure whether the goal is carried out over theyear ornot. MHC also measures the turnover rate in key positions and has threecategories for this process. The first category is if the employeeleaves of freewill to another company, the second is when MHC has failed with theselectionprocess and asks them to leave and the third is if they have left due tootherreasons. According to MHC, they can see how they have replaced these key
  59. 59. positions and how they have succeeded by using this process. However,thisprocess must be carried out over a couple of years in order to becomevalid andeffective in a statistic way so that they can establish a trend.MHC is using various ways to scan its business environment forinformation.Much of the information comes from the different market companies aroundthe world. Since they have organisational management reviews in allmarketsthey do not only discuss one specific market but the whole organisation.Theyalso have a department called business intelligence that works withdifferentkinds of business scanning. However, the information comes mainly fromthedifferent market companies. MHC says that it is the HR department thatconducts the organisational management reviews, which is based on theinformation collected.External and Internal Influences on HRPMHC argues that different kinds of policies are important and affectstheplanning process much more the employment laws do. According to MHC, itisvery important that the company has good company ethics. It is importantthatthe employees feel that they are treated with fairness, that MHC canpresentthis and that they have a policy around the recruitment processregardinginternal recruitment. The effects of not being careful with this issuecould meanthat you internally demoralise the whole organisation.In the strategic plan MHC plans for growth, have goals for growth indifferentmarkets, which means that a strong recession obviously affects the plan.However, MHC argues that the HR department does not lose attention in a
  60. 60. recession but that they deal with different kind of questions during aneconomicboom and an economic recession. During a recession they deal with issuessuchChapter 4 Summary of Empirical Findings4 5as how they can make the organisation more cost-effective and in aneconomicboom they focus more on recruitment issues.In order to manage competence supply and demand MHC tries to workcloselywith universities and focuses especially on the engineering side andresearchwork within wound care because it is MHC’s greatest high tech area.Theywork a lot with Chalmers University of Technology and have different jobfairsto market themselves. They argue that they try to influence and seedifferenttrends. MHC also look at what competencies they believe they need in thefuture and that it is very important that they have a close dialoguewith theuniversities in order to get the right people with the right competencein thefuture.According to MHC they are not very sensitive to political andinternationaloccurrences since they are not affected by the business cycles as muchas otherindustries. However, incidents such as the fact that Ireland (2002)voted infavour of expanding EU affected them positively in the sense that it iseasierfor them to go into new markets.MHC say that they can see a change in attitudes in the workforce, notnecessarily that people leave the company but employees have higherexpectations on careers today compared to ten to fifteen years ago.According to MHC, automation has influenced the way they conduct HRP,
  61. 61. especially in the wound care area. The technological changes have forcedthemto look at what competencies are required ahead, particularly in theresearcharea. They argue that it is important that top management has patienceand notalways look at quick returns. MHC says that, in that sense it might beanadvantage that they are not listed on the stock exchange.MHC argues that the internal factors influence HRP much more than theexternal factors do. The fact that they are internationally present withmanysmall own market companies has influenced HRP and there are more issuessuch as different cultures and language barriers to consider.Chapter 4 Summary of Empirical Findings4 6In the future MHC believes that social competence will be increasinglyimportant. They argue that it is complicated to develop socialcompetencewhile technical competence is something that you develop naturally. Withsocial competence MHC means the ability to understand yourself andothers.This would mean that they could build more effective teams, takeadvantage ofdifferences and be able to communicate more efficiently. It is not onlyimportant that the managers’ possess social competence but should workacrossthe whole organisation. According to MHC this is an area that should bedealtwith earlier, already in schools and universities.4.5 Sahlgrenska UniversitetssjukhusetSahlgrenska Universitetssjukhuset (SU) is the largest hospital inNorthernEurope. The hospital has approx. 17,000 employees and is spread overseveralgeographical areas in the Gothenburg region. Sahlgrenska was founded in1899, but its current structure was established in 1997 when theemergency