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Categories: Knowledge15 min read

Human Resource Planning: 5 Critical Steps to Keep in Mind

The process of ensuring that an organization’s human resource requirements are identified, and plans are established to meet those requirements is known as human resources planning. Defining HR planning is one thing; having the process run smoothly and efficiently is quite another. For HR planning, there are two approaches to responsibility: one is central planning, where the HR department or human resources manager takes responsibility for the entire division or organization; the other is distributed planning, where team heads or members do the planning for their groups within the organization.

What is Human Resource Planning?

Human Resource Planning is the process of evaluating what needs a company has when it comes to manpower and planning to achieve the optimum employee deployment. The goal is to have qualified employees for every job and avoid shortages and surpluses of staff. The underlying economic concept is the one of demand and supply which can be applied to HR.

The Importance of Human Resource Planning

In both cases, the function is not typically a C-level one because the process is usually bottom-up and not planned for a multi-year perspective. Yet make no mistake – the practice is incredibly important. Ideally, HR planning should serve as a link between human resources management and the overall strategic plan of an organization. Aging worker populations in most industrialized countries and growing demands for qualified workers (i.e., the so-called “skills gap”) have moved the importance of HR planning up in organizational practice, and this development is likely to increase further in the immediate years ahead. According to Gartner, rapid changes and business transformation initiatives require chief HR officers and HR leaders to invest in workforce planning technologies to optimize their workforce’s composition, cost, and productivity.

This article examines the five essential steps in strategic planning and workforce management, explains the technologies that can support those steps, and offers case histories that show how the adoption of planning technology can streamline workforce management with considerable benefits to the organization.

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The Five Steps of Human Resource Planning

There are five principal process steps to effective strategic planning for workforce management:

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1. Leverage Financial Planning to Establish Strategic Human Resource Goals

From our perspective, sales planning is the most important planning piece for a company. HR is the second. With sales planning, you as an organization determine the size of the company in the future. With HR planning, you determine how much to spend on the workforce based on the projected size and requirements of the organization.

This is fundamental: sales planning develops an estimate of how many people you need onboard to meet your needs moving forward. This year there are X employees. Based on sales planning, next year you will need Y. This is always the starting point for HR planning: establishing a baseline.

Finance and HR leaders can add strategic value to the corporate planning process and increase HR workforce planning effectiveness by extending collaboration and sharing additional data points between these plans.

(Gartner)

How Jedox Leverages Financial Planning

Across each of the five essential HR planning steps that are going to be discussed in this blogpost, Jedox provides technology that speeds and streamlines the process steps.

The Jedox HR planning tool provides sophisticated yet simple-to-use online calculations, as well as a “splashing” function that allows users to modify inputs and have them break down along the established structure. For example, ordinary input into a consolidated cell is not possible to prevent users from doing so unintentionally and thereby corrupting data. Consolidated data are the result of base element data. However, Jedox allows users to enter a value intentionally with the purpose of “splashing” – to split the value automatically among the subsequent base elements. So, say, if a total is decreased by 10 percent, each of the individual categories decreases accordingly.

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This can be done by several factors (e.g., in a certain region or functional area, decreasing by 10 percent, while in another region decreasing less or more as desired). Further, having an OLAP database allows users to filter and view data from different perspectives, enabling a more sophisticated breakdown of strategic goals that is much better than having to use an overarching percentage. In this way, the goals may be applied more precisely.

2. Prepare Human Resource Planning

The second step is to prepare the HR planning process to determine who will be involved, who should contribute, and so forth. As stated above, there are two basic approaches to this process: centralized, where the HR department or manager takes responsibility for the process across the organization or division; or decentralized, where each manager or designated team members contribute to the planning for their team. After you determine who contributes, you establish the number of lines to be planned for.

The two most important lines are headcount and full-time equivalents (FTE). These terms should not be mixed up, but headcount is indivisible, while an FTE may be a percentage (e.g., 50 percent, 25 percent). In some cases, where the planning is very lean, HR planning only addresses these lines.

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Human resource planning can be lean or it can incorporate hundreds of different planning parameters. There is no single approach for every company and every planning process.

Consider that case: A company has 1,000 employees. Strategic planning has shown that costs need to be cut by 10 percent, so HR planning determines which organizational teams will have to cut staff to comprise the 10 percent. In other cases, many more lines are incorporated in planning. These could include wages and salaries, parameters by region (e.g., insurance plans, retirement plans, employee type), or non-wage labor costs (e.g., company cars, car allowances, transportation cards, social expenses).

The point is there is no single approach for every company and every planning process. It could be appropriate for a company to have only two lines; another may have 30 lines. It depends on the fit within the individual company. One caveat: it is not having the highest amount of granularity (i.e., the amount of data) that is critical; it is having the right amount of data that is critical to having an effective HR planning process.

How Jedox Supports the Human Resource Planning Process

Providing actual figures is about having interfaces to existing systems – getting access to enterprise databases. This is where the Jedox Integrator comes into play. With this user-friendly and powerful tool, users can combine all database systems with the multidimensional Jedox OLAP server – and thus quickly and easily integrate BI/EPM applications with Jedox into existing IT landscapes. This ability enables users to have important data wherever it is needed.

Security is also an important issue here. Because HR data is typically confidential, companies do not want to give all employees access to the wages and salary information on individuals. So being able to define or restrict users is an important function that Jedox provides.

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Easy data integration and security management in web-based human resource planning: You control the granular data security model and manage users, groups and roles so a cost center manager will only see their team’s individual data.

3. Collecting Data

The third step of the process is bringing in the actual data. Typically, when doing HR planning, a company knows most of the people working next year are resident this year, because staff is stable year to year. Over the course of a year, a company may lose several people, may add to fill those losses; but the majority of those who will be onboard are already there. So, the organization knows their names, wages, managers, etc. This data is the basis for planning.

For people to contribute to the HR planning phase, they need to submit actual data in a useable form. Once the strategic goals are established, the planner must focus on individuals:

  • Whom do I need to keep?
  • What function or functions do I need to add to the team?
  • When should this happen: Q1 or Q4?
  • Is there a lengthy process in finding qualified personnel?

It might be that you cannot add until Q4. The answers to such questions impact costs, but they also impact productivity. Contributing on the planning level is a major step. Usually with workforce management you talk about individuals; but with new hires, you do not know an individual. You do, though, have a personality or profile in mind (e.g., experience, education, salary level).

Good planning systems provide “delta planning,” so instead of having to punch in all the data, you only enter the changes. For example, you may have several people on board, and one is leaving. So, there will be an increase in salary to fill that position. In a good system, you put in the increase but not the total wages before and after the increase. This process is much more efficient: taking over existing data and only putting in the changes, rather than re-inputting everything.

How Jedox Streamlines Data Collection

This step is where Jedox’s Web technology provides significant advantage by delivering streamlined forms that save time and effort by allowing users to inspect actuals as well as input planning data online. Particularly when HR planning is distributed, this process involves a potentially substantial number of contributors who typically do not do HR planning as a primary function. So, the input forms must be convenient, self-sufficient, and readily understandable, or the planning will lose momentum.

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Planning human resource data efficiently in Jedox Web

Jedox supports and sustains momentum by providing online forms that meet those requirements, and participation is further supported as planning managers need only send out a simple URL for users to access everything they need to contribute effectively. There is no need to install an application on every computer. Additionally, there is no need for training, as the forms are intuitive.

4. Establish Workflow And Consolidation

Workflow must be established to provide process control from a governing perspective. Have all designated parties contributed to the planning? Have top-down targets been met? If it is in line with strategy and on time, the workflow should provide a verified, complete set of planning data. Through consolidation, the data is totaled and then can be compared with strategic goals. This may prove to be fine, or another iteration may be necessary.

For example, if you projected productivity increasing by 10 percent and you have total personnel costs not increasing by more than 12 percent, you may discover that you have enough personnel onboard for next year, but the salary planning exceeds budget. Or it could be that you have broken down your targets for a 10 percent reduction in staff, but some teams could not function to meet requirements at the 10 percent reduction. So new iterations are needed to align planning with your goals.

How Jedox Facilitates Workflows

Many companies drive this process with Excel and have come to know first-hand the meaning of the term “Excel hell.” This process is manual, labor intensive, repetitive, and requires untold version management. On the other hand, Jedox’s central OLAP database makes workflow and consolidation easy by updating automatically and providing immediate iterations based on input. Users can see deviations easily and readily identify their source.

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Safeguard your human resource planning process with powerful workflow and status monitor.

5. Integrate Human Resource Planning Into Enterprise Financial Planning

Once the HR planning is aligned with strategy, it can be integrated to the cost center planning and finally to the profit and loss statement (P&L) to provide a consistent view of financials across the enterprise.
This process is a growing trend, driven from the financial side. According to Yvette Cameron, research director for human capital management technologies at Gartner, there is a global trend where the chief financial officer is taking greater interest in HR, resulting in “a greater uptake of conversation about HR and finance together.” From our perspective, this is a natural and logical development.

How Jedox Ensures Integrated Planning

Jedox features free database modeling, so instead of having a fixed schema of an application, it is highly flexible in defining data structures and providing dimensions and cubes to meet your requirements, regardless of your enterprise systems. Think of having a cube for HR planning, another for cost control, and another for P&L. With Jedox, these cubes can be easily linked using an online calculation rule, so users can pick data sitting in one cube and have it display in the others. This feature is powerful integration.

jedox integrated planning

HR as the CFO’s partner: Integrating HR planning into the overall P&L provides a consistent view of financials across the enterprise.

Case in Point – Unity Media

 

Now that we have looked at the HR planning steps and how Jedox technology supports their efficient execution, let’s examine a real-world example of how effective HR planning can accrue to a company’s benefit:

Unitymedia is Germany’s leading cable network operator. The company has 2,700 employees and provides broadband cable services to 13 million households in three states. Unitymedia is a subsidiary of Liberty Global, the largest international TV and broadband company. Unitymedia is in the process of replacing its Excel-based tools for planning, reporting, and analysis with a Jedox-based solution. Due to the positive experiences within its finance department, the company has also deployed the software in human resources.

Thanks to Jedox, the HR team was able to implement a tailored planning solution for its specific needs. The granular planning model includes all material costs allocated to internal and external staff. It also automates complex cost accounts, individual commission models, and staff shifting through defined formulas and rules. Planning at Unitymedia is based on actual data, which is loaded monthly from SAP HCM and adjusted by HR business partners in the individual departments. As soon as the plan data has been revised and approved, the aggregated full-time equivalent (FTE) values and costs are available in the financial planning. This clearly shows how the planned personnel spending affects the P&L. In the future, the team intends to add rolling, medium-term planning, and further statistical analyses to the Jedox solution. A dashboard containing all HR performance indicators is also in planning.

 

Doing it Right?

More than a century ago, the American author and entrepreneur Orison Swett Marden made an observation that holds today: “A good system shortens the road to the goal.” For HR planning, the five process steps are a good system. But to get the most out of them, enterprises need to incorporate technology that helps, not hinders, reaching their planning goals.
A recent independent study shows that 90 percent of all companies still use Microsoft Excel for annual planning – and find they are reaching its limits. This finding is true for HR planning as well. Here is a question you need to answer to determine if you are doing HR planning right: Is Excel still a principal tool in the process? If so, chances are you are not doing it right.

A better tool for HR planning is Jedox. It empowers business professionals to capture and write back budget data through the Web and mobile devices. Jedox Web gives budget owners throughout an enterprise direct access to essential business data. Managers run scenarios and what-if analyses to make well-founded decisions in line with strategic plans, which is, of course, a principal goal of HR planning.

You want to kick-start your HR planning with an easy to use, prebuilt planning model?

Discover the Jedox Model for HR professionals and test-drive the application in the Jedox Marketplace (no download required):

Jedox

Jedox is the world’s most adaptable planning and performance management platform that empowers organizations to deliver plans that outperform expectations. Over 2,800 organizations in 140 countries trust Jedox to model any scenario, integrate data from any source and simplify cross-organizational plans across all business systems. Jedox enables a culture of decisiveness and confidence so teams can plan for opportunities, react quickly to changes, and uncover what they didn’t know was possible.

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