Relevancy of HR Planning in a Changing and Dynamic Economic Environment Essay

Introduction

The shifting characteristics of the 21^st century business environment mainly occasioned by forces of globalization, intense competition, technological advancements, demographic shifts, economic realities, and a changing workforce has generated immeasurable complexities and uncertainties for modern organizations.

Undoubtedly, these uncertainties can impede efficient operations of organizations, thereby straining their competitive edge, investment plans, and projected outcomes (Turner, 2002). To be effective, organizations have been necessitated to put in place mechanisms and strategies that must endure and manage the environmental forces.

One of the most common strategies that have generated increased interest as a proactive measure to shield organizations from these uncertainties is formal planning. Indeed, leading organizations have undertaken to entrench formal planning in every facet of organizational management and business strategy, including human resource initiatives.

According to Jackson & Schuler (1990), major shifts in modern-day business, economic, and demographic trends are compelling organizations to integrate human resources with the overall strategic planning process with a view to adopt a long-term perspective unlike in the past when operating conditions guaranteed comparative environmental certainty and stability.

It is against this background that this paper aims to evaluate the relevancy of HR planning in a changing and dynamic economic environment. More importantly, the paper will critically evaluate how a contemporary approach to HR planning is more applicable in such an environment compared to a more traditional approach.

Defining HR Planning and Dynamic Economic Environment

What actually constitute HR Planning is contentious as the concept has drawn numerous definitions from scholars and HR professionals. What is certain for now is that HR planning is an extremely vital function within an organization charged with the responsibility of evaluating the organization’s strategy and then deploying the needed human capital in terms of employees when it is called to do so by the strategy (Rothwell & Kazanas, 2003).

In other words, it entails bringing focus, alignment, purpose and energy to the organization’s business strategy through available manpower resources. According to Turner (2002), HR planning can be “…defined as the relatively specific element of HR strategy-making that proposes appropriate actions with regard to human resourcing” (p. 45).

Pattanayak (2005) defines effective HR planning as “…a process of analyzing an organization’s human resource needs under changing conditions and developing the activities necessary to satisfy those needs” (p. 34). It can therefore be argued that the function falls into the broad locale of employee resourcing – a multifaceted process entailing planning, acquiring, and apportioning the right mix of human resources to cater for the emerging needs of the organization.

Organizations are affected by their overwhelming demand for labour, and therefore are in need of constant supply of labour. In the light of this, HR planning entails having prior knowledge of what the staffing requirements will be, evaluating the supply of appropriate employees in the organization and labour market, and developing mechanisms to fulfil the staffing requirements of the organization (Rothwell & Kazanas, 2003).

It is important to note that strategy formulation can only take place after the personnel charged with HR planning musters adequate insight into the strengths and weaknesses of the organization’s workforce. In equal measure, strategic plans designed to push the organization’s agenda forward can only be implemented expeditiously if it is staffed with the right mix of human resources to avail the needed expertise, knowledge, and abilities (Fountaine, 2005).

Consequently, the amount of efforts devoted towards planning for and handling human resource requirements can translate into a competitive advantage or disadvantage. It is a well known fact that organizations which design and implement effective HR planning approaches than others usually adjust better to changes in the external environment, not mentioning the fact that they have the most suitable employees.

On the other hand, modern organizations are faced with the harsh reality of operating in a dynamic economic environment. In essence, the phrase is used to insinuate the changing surroundings in which organizations must navigate through and adapt to new situations to surmount possibly erratic obstacles (Curuth & Hondlongten, 1997).

In most occasions, the shifts in the operating surroundings are occasioned by “…environmental instability, demographic shifts, changes in technology, and heightened international competition” (Jackson & Schuler, 1990 p. 223). Other possible culprits include forces of globalization, regulatory and legal controls, economic conditions, and public attitudes. This notwithstanding, all these forces converge in the modern business arena, generating complexity and uncertainty for organizations.

As such, the survival of an organization in a dynamic economic environment to a large extent depends on its ability to plan and focus on core business strategy in order to adapt quickly. It is important to note that the above named environmental forces and shifts changes “…the need for and nature of human resource planning in leading organizations” (Jackson & Schuler, 1990 p. 223).

Traditional and Contemporary Approaches to HR Planning

Traditional approaches, according to Bogardus (2004), entail having the right kind or type of employees in the right type of jobs at the right time-frames. Its rationale is based on the basic premise that business needs must at all times inform staffing requirements and human resource planning.

As such, HR planning becomes a reactive process. Accordingly, the reactive character of the process goes hand-in-hand with a short-term strategy defined by the needs of the organization rather than a comprehensive staffing strategy.

In essence, rarely do traditional approaches to HR planning result in explicit staffing and development strategies that could actually be implemented in the organization (Pierce & Aguinis, 2009). According to Jackson & Schuler (1990), this approach found more usage in the past when comparative environmental certainty and stability could be guaranteed.

This mechanistic approach to HR planning has some unique characteristics which are outlined below:

• It is reactive in nature since staffing needs are informed by short-term business needs.
• It is largely influenced by line management concerns rather than the need to have a comprehensive longer-time staffing strategy. Indeed, organizations using this strategy request line managers to delineate staffing needs for each fixed term of the planning period mostly based on headcount or employees whose input are no longer required (Entrepreneur, 2000).
• It include staff planning as an element of the organization’s annual business planning process, implying that staffing needs are essentially tied to business needs.
• It is most effective in realistically steady product and labour markets. In other words, it functions well if changes in the external environment happen at a more measured pace (Indris & Eldridge, 1998).
• Under the approach, most workers, including managers, are evaluated and rewarded for realizing short-term goals that may be contradictory to the longer-term perspective of what strategic staffing really entails.
• According to Entrepreneur (2000), “forecasts of needs are often “hockey-stick” projections that are not realistic or grounded in business plans” (para. 5). This is so because some managers, especially those operating in dynamic economic environment, experience difficulties or are completely unable to provide forecasts of staffing needs for fixed points in time that are required of them when traditional approach to HR planning is in use. In the event that they are able to forecast the planning needs, they are absolutely in no position to forecast the required capabilities.

According to Jackson & Schuler (1990), “…contemporary human resource planning occurs within the broad context of organizational and strategic business planning…It involves forecasting the organization’s future human resource needs and planning for how those needs will be met” (p. 223).

In general terms, contemporary approach to HR planning includes establishing objectives that will set the agenda for development and implementation of programs and strategies aimed to ensure that people are obtainable with the right characteristics and abilities when and where the organization requires them.

This approach operates under the premise that organizations have to adapt to the dynamic economic environment much faster and with enhanced risk (Briggs, 2001). In the 21^st century, major shifts in business, economic, technological, and social environments are generating uncertainties and complexities that are obliging organizations to integrate business planning process with staff planning and to adopt a longer-term perspective.

Many organizations now understand the perceived benefits that a more contemporary approach to HR planning can bring especially in necessitating them to develop longer-term strategy to staff planning. This approach has enabled leading organizations to develop and implement strategic workforce plans to cater for their present and future staffing needs (Curuth & Hondlongten, 1997).

According to Entrepreneur (2000), strategic workforce planning or strategic staffing can be defined as “…the process of identifying and addressing the staffing implications of business plans and strategies, or better still, as the process of identifying and addressing the staffing implications of change” (para. 2).

The definition demonstrates that the impact on staffing for the organization should be well outlined and defined whenever any changes or alterations to strategic business plans are being considered – may they be short-term or longer-term. The following are the essential points concerned with shaping and management change:

• Define the number and types of people who will be needed by the organization at a particular point in the longer-term for effective implementation of the organization’s plans. The number of people needed should include all staffing levels while the types must encompass all capabilities found in the labour market that may be needed by the organization to fulfil its staffing requirements in the future (Entrepreneur, 2000; Paynes, 2009). In most cases, this plan also details how the identified number of people should be organized and deployed.
• Undertake a comprehensive identification of the human resources that are presently available.
• Forecast the ‘supply’ of skills or capabilities that will be accessible at the longer-term for which requirements have already been defined. According to Entrepreneur (2000), this forecast must factor in fundamental issues that affects staffing such as turnover, attrition, planned movement, among others.
• Identify and categorize the differences between expected demand and projected or forecasted supply.
• Lastly, develop and implement staffing strategies/approaches that are required to seal talent/skills gaps and get rid of surpluses.

Advantages and Disadvantages of HR Planning

HR planning, especially the contemporary approach has numerous advantages. First, through the process of evaluating the labour market for types of people and skills that may be needed in the future, the organization is able to discover prime sources for its staffing needs (Pattanayak, 2005).

This contemporary approach translates into a business strategy since such an organization will never encounter staffing constraints in addition to ensuring that it will have a greater choice for selection of the right mix of people with the right abilities in the right position, thus enhancing competitive advantage. Indeed, Pattanayak (2005) is of the opinion that HRP offers the advantage of developing “…a system for providing a suitable worker-job-fit” (p. 34).

Second, HR planning enables an organization to set up its strategic direction and plan for its total workforce (Badaway, 2007). This, according to Jackson & Schuler (1990), is largely achieved by integrating an organization’s business planning process with its human resource process to effectively meet both short-term and longer-term goals and objectives as set out by the organization. To achieve this business strategy, an organization must employ a more contemporary approach.

Third, HR planning makes it possible to develop proper mechanisms of forecasting, controlling, and regulating staffing requirements. In the modern dynamic economic environment, it serves the organization right to forecast future staffing requirements “…irrespective of whether a growth or decline in numbers is predicted, because this makes it easier for employers to match supply and demand” (Marchington & Wilkinson, 2005).

Fourth, HR planning can be credited for creating an enabling environment for organizations to link their business objectives and strategies with people planning activities. According to Jackson & Schuler (1990), this is the only way that can assist organizations operating in the modern dynamic economic environment to remain profitable.

Another advantage tied to this is that by integrating HR planning and business planning process, organizations are bound to reap benefits of improved teamwork, motivation, commitment, productivity, and profitability.

According to Paynes (2009), HR planning is beneficial to employees as it also entails developing and implementing programs and strategies aimed to enhance employee performance and satisfaction. However, these benefits, which are tied to the organization’s overall business strategy, can only be realized when a more contemporary approach is employed as opposed to the traditional view.

Finally, HR planning allows an organization to invest in human resource development. This is a key area in the struggle to realize the set objectives since employees are considered as the organization’s greatest asset (Paynes, 2009).

It therefore follows that investing in short-term and long-term development of human resources through offering training opportunities is key to achieving business success. In modern times, workers need to receive continuous training and appraisal to effectively cope with the ever shifting trends in economic, social, and technological environments (Pattanayak, 2005).

HR planning has several disadvantages. First, the longer-term forecasting for the future is often affected by unexpected influences of the macro environment (Paynes, 2009). A case in point is the unprecedented 2008 global financial meltdown. Financial institutions such as the Lehman Brothers, Wachovia, and AIG must have put in place longer-term staffing policies only for them to be suddenly disrupted midstream by the external outcomes of the economic crisis.

Other analysts, while oblivious of immense benefits brought by HR planning, argue that it is costly, rigid to implement, and time-consuming (Rothwell & Kazanas, 2003). In their book, Marchington & Wilkinson (2005) report that some organizations who may want to appear flexible perceive HRP as a bureaucratic and rigid way of managing people and organizational resources. Still, the techniques and strategies used in HR planning can at times be complicated.

Evaluating the Applicability of Contemporary Approach in a Dynamic Environment

Practical and evaluative studies conducted over time demonstrate that contemporary approach to HR planning is by far the most applicable approach in a changing and dynamic environment (Briggs, 2001).

Indeed, HR historians are in agreement that the contemporary approach evolved in the decade of the 1970’s when major shifts in business, economic, technological, and social environments started generating complexities and uncertainties for organizations (Taylor, 2005).

Prior to this period, organizations operated in conditions of comparative environmental certainty and stability, and therefore were contented with the traditional approach. Due to the stability and certainty of the external environment, HR planning was reactive in nature and largely focussed on short-term orientation.

Though this approach is still in use by some organizations today, it is hardly a match for a more contemporary approach in terms of applicability to a changing and dynamic environment.

According to Jackson & Schuler (1990), “…increased environmental instability, demographic shifts, changes in technology, and heightened international competition are changing the need for and the nature of human resource planning in leading organizations” (p. 223).

Indeed, these shifts are creating uncertainties that are obliging modern organizations to integrate business planning process with HR planning, in addition to adopting a longer-term orientation.

The integration and forecasting, according to Pierce & Aguinis (2009), are some of the basic tenets of a more contemporary approach, and this argument therefore demonstrates why a contemporary approach is more applicable in such environment.

A contemporary approach assists modern organizations to adapt to the continuously shifting environment in ways that traditional approaches can never deliver. In essence, a contemporary approach is a proactive strategy that is put in place to strategically plan for the organization’s staffing needs into the future, in addition to aligning HR planning with core business plans and objectives (Taylor, 2005).

It therefore follows that these strategic plans facilitates an organization’s effectiveness in adapting to change since they are integrated with its short-term and longer-term business strategy and goals. Consequently, a more contemporary approach is more applicable in a dynamic changing environment as it is capable of aligning key business and personnel strategies and plans to adapt to rapid unprecedented changes within the environment.

The environmental forces associated with a changing and dynamic environment comes with increased uncertainties and complexities which, if not well addressed, could inarguably hinder the realization of an organization’s business objectives both in the short-term and longer-term , not mentioning the fact that they impede the organization’s capacity to implement its plans.

According to Entrepreneur (2000), a contemporary approach to HR planning assists organizations to identify such constraints and address them “…as part of the planning process, not left as surprises to be uncovered when implementation begins” (para. 9).

As such, organizations operating in highly volatile and dynamic environments stand to achieve high-quality results both in their staffing arrangements and business strategy if a more contemporary approach is used as opposed to a traditional one that employs mechanistic and reactive approach to deal with arising constraints.

In today’s business environment, organizations must have the capacity to respond to shifting environmental forces brought about by a myriad of topical issues and convergence of interests among business concerns. For instance, organizations are increasingly being faced with the prospects of new business opportunities or some aspects of negative publicity (Taylor, 2005).

As such, the traditional multi-layered top-down approach toward HR planning is inadequately capable of handling such challenges, which may inarguably expose the organization and employees to a lot of suffering and loss of productivity unless immediate remedial measures are taken (Paynes, 2009). Consequently, a flatter and leaner contemporary approach is more applicable in a dynamic and changing environment as it enhances faster and more effective communication, information flow and organizational outcomes.

Lastly, due to the increasingly unpredictable economic environment, organizations are under extreme strain to make swift but rational decisions on a wide range of issues such as employee deployment, mergers and acquisitions, and allocation of scarce resources (Taylor, 2005).

These decisions may have a profound effect on their operations, performance and business strategy. Gone are the days when organizations enjoyed relative environmental certainty and therefore could afford to make a reactive response to such and other germane decisions.

But in the presence of a contemporary approach, modern organizations can afford to manoeuvre their way around making difficult decisions relating to staffing requirements since a mechanism that integrate business needs and plans with HR planning is already in place. As such, a contemporary approach to HR planning becomes a critical decision-making tool for organizations operating in a changing and dynamic environment (Sims, 2007).

Every management technique must experience some teething problems for it to be perfected, and contemporary approach to HR planning is no exception. According to Pattanayak (2005), the effectiveness of contemporary approach in a changing and dynamic environment is known to exclusively depend on how the existing human resources are utilized and how future requirements are met.

Due to its complicated nature especially in integrating human resource requirements with business needs, it requires a great deal of effort for organizations to convincingly adapt to unprecedented changes as was witnessed in 2008 when the global financial meltdown came knocking.

Relevancy of HR Planning to Contemporary Organizations

Planning is a very important aspect not only to organizations, but also to our everyday endeavours as it enables us to achieve our objectives. Organizations that fail to plan for their future needs and growth patterns have very little chances of surviving the competition ahead.

The relevancy and importance of HR planning to contemporary organizations have been well researched and documented. According to Sims (2007), most organizations have embraced HR Planning, especially the contemporary approach, due to its immense benefits. For instance, organizations are increasingly realizing that it is no longer tenable for them “…to assume that the staff needed to implement [their] plans is readily available and quickly recruited, developed and deployed” (Entrepreneur, 2000 para. 9).

As such, there is always the need for contemporary organizations to plan ahead and in anticipation of possible exigencies within the external environment (Rothwell & Kazanas, 2003). Indeed, absence of HR planning is more likely to create operational hurdles for contemporary organizations. For instance, staffing constraints such as failure to recruit adequate number of employees with the right kind of skills may impact negatively on an organization’s ability to implement its business strategy.

HR planning is relevant to contemporary organizations by virtue of assisting line managers to make sound decisions on staffing needs since they have all the necessary information at their fingertips.

The information obtained from HR planning is also of germane importance to organizations as it greatly assists them to make better decisions in an attempt to meet their needs and achieve their set objectives (Rothwell & Kazanas, 2003). Of particular importance is the fact that HR planning greatly assists contemporary organizations to make sound decisions on the following:

• How many employees does the organization have?
• What type of human resources as far as skills and capabilities does the organization have?
• What type of human resources as far as skills and capabilities will be needed in the future?
• The capacity of the labour market to respond to the organization’s staffing demands
• What are the current costs of labour?
• How can the organization keep its most valued employees?

More importantly, HR planning forms a fundamental constituent of organizational management tasked with the enormous undertaking of keeping pace with the changes in the nature and composition of workforce in addition to ensuring that the right mix of people are readily available to the contemporary organization at the right time (Turner, 2002).

As such, HR planning is not only fundamentally needed for effective functioning of contemporary organizations, but it is also a key player in ensuring such organizations focus on their business strategy to retain a competitive advantage.

Indeed, HR planning plays a central management function when organizations merge, businesses are expanded, plants are relocated, or when business operations are scaled down due to challenges in the external environment (Turner, 2002). This demonstrates that HR planning is not limited to traditional HR duties of staff selection and training.

Overall, many contemporary organizations are now realizing that they can benefit from the integration of business processes and human resource planning. It is important to note that, traditionally, there has been a feeble one-sided relation between business strategy and HR planning, necessitating the latter to be a reactive process.

But with a more contemporary approach, “…business plans are considered somewhat malleable in that they are influenced by human resource considerations, such as the cost and availability of labour” (Jackson & Schuler, 1990 p. 236). Indeed, for modern organizations to become profitable, they must link their business objectives and strategies with people planning activities. In equal measure, performance objectives can hardly be met if the right people are unavailable to push the organization’s agenda forward.

From the discussion above, it can be safely concluded that HR planning is indeed very relevant to practice in contemporary organizations. The HR planning component has not only assisted organizations to match the size and expertise of their manpower resources to the needs and requirements of the organizations (Rothwell & Kazanas, 2003), but it has also assisted them to effectively respond to dynamic shifts in the external environment by creating an enabling environment for managers to make sound decisions.

More importantly, it has assisted organization s to integrate their business objectives and strategies with people planning activities thereby enhancing the achievement of performance objectives.

There are many examples of contemporary organizations utilizing HR planning to forecast and maintain their staffing requirements in addition to developing their business strategy and furthering their competitive advantage.

It should be noted that in order for HR planning to serve as a tool that can be used to enhance an organization’s competitive advantage, the acquirement of key employees must first and foremost be strategic, that is, it must be perceived as a proactive strategy that is strongly linked to the core business needs (Turner, 2002).

Many leading companies such as IBM, Marriot Corporation, Exxon, General Electric, Camden Corporation, and Squibb, among others, have embraced HR planning to integrate their human resource requirements with their key business objectives. These companies have allocated huge resources in integrated human resource management systems with the aim to come up with well-developed programs that are used to enhance the effectiveness and capacity of their own human resources (Jackson & Schuler, 1990; Ulrich, 1992; Taylor, 2005).

Some of the critical components of the programs include: staff selection procedures; regular and systematic employee performance reviews; mentorship programs in institutions of higher learning; career planning activities; comprehensive forecasting of types and sources of skills and abilities needed in future; and involvement of employees in planning and evaluating their own development. Such programs are vivid examples of what actually needs to be done in order to achieve long-term human resource planning.

Possible Future Directions

The broad concept of HR planning appears to be gaining steam by the day as organizations try to adapt to the shifts and external forces of the 21^st century’s highly volatile and dynamic environment. It is becoming clearer that failure to invest heavily in HR planning may have profound and uncompromising effects on businesses since traditional approaches seem far behind modern expectations.

Judging from current indicators such globalization forces, rapid technological advancements, demographic shifts, and economic realities, it is indeed plausible to argue that organizations will be in a position to gain much more, productively and competitively, if the employ proactive strategies in dealing with their human resource requirements and business needs (Turner, 2002).

Danger is already looming in the doorsteps of organizations that have refused or ignored to reform their strategies to be in line with the dynamic changes witnessed in modern business environment.

The relevance and importance of HR planning in an unstable environment as is presently the case cannot be put to question. It has been demonstrated in this paper that HR planning not only assists organizations to deal with uncertainties and complexities occasioned by environmental forces and shifts, but also has the capacity to assists organizations deal with staffing constraints by forecasting and planning future staffing needs.

The uncertainties occasioned by an unstable environment have the capacity to impede effective operations of an organization, thus diminishing its competitive advantage (Taylor, 2005; Jackson & Schuler, 1990). Such an impediment will put into disarray the organization’s strategy and productive capacities.

More importantly, organizations operating in an unstable environment must put in place necessary mechanisms that are able to identify the number and types of human resources that are presently available, and at the same time be able to forecast the supply of skills that will be accessible at the longer-term (Entrepreneur, 2000).

This way, possible staffing constraints will be curtailed, enabling organizations to transact their operations in tandem with the set objectives. However, this can only be achieved in an environment where HR planning is firmly entrenched in all aspects of organizational life.

To be more effective, however, HR planning needs to focus on adapting to change. This is so because organizations are bound to undergo heavy losses in terms of investments and human capital if they are not well prepared to deal with sudden changes occurring within the external environment.

A case in point is the 2008 global financial meltdown which caught major global corporations unawares. The challenge really is not to come up with measures that can predict or stop the changes from happening; on the contrary, the challenge for HR planning is “…to propose actions that contribute to long-term corporate success, not only by being prepared to take into account surprise circumstances but also by introducing new ways of thinking” (Turner, 2002 p. 46).

As such, HR planning must at all times involve developing strategies and approaches that are to a certain degree open or flexible about the direction the organization wishes or proposes to take. This way, organizations operating in unstable environments will be able to effectively adapt to change through the assistance of HR planning.

Conclusion

From the discussion, it is clear that HR planning will become more closely aligned to the needs and strategies of organizations as we progress further into the 21st century. Business needs are increasingly becoming people needs, and organizations that continue to experience shortages of the right mix of human resources are increasingly becoming vulnerable to the exigencies of the changing and dynamic environment of modern times.

As such, HR planning is relevant in a changing and dynamic environment. Indeed, HR planning is increasingly becoming a determinant of organizational performance and effectiveness, not only in deploying scarce human resources effectively, but also in ensuring the realization of the organization’s objectives and plans (Taylor, 2005).

More importantly, it has been demonstrated that HR planning involves the creation of recognized and clear sets of proposals intended to attain decisions that will further assist in attaining long-term organizational performance. This is good for organizations operating in volatile environments, further justifying the need for HR planning.

As such, HR planning is necessary for the reason that it is a useful HR tool that aligns and integrates people planning activities with organizational strategies. Second, it guarantees that “…the demand for people numbers, knowledge, skills, attitudes and values are marched with the supply of these attributes” (Turner, 2002 p. 47).

Third, it provides a mechanism by which staff considerations are raised early when strategy discussions are being held to ensure proper integration of people activities and business-based plans. Fourth, it ensures an organization and management takes account of staff as the main contributors of success by distinguishing their distinctive input to strategic direction and performance. As such, it is only plausible to argue that HR planning is relevant in a changing and dynamic economic environment.

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