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Quality of HR planning – Part two: The HR planning process

Posted by  Tijana Balotic Truong

In the first article of this series, on the quality of HR planning, we discussed the importance of securing a strategic fit and defining the scope of HR plans. Now we will look into the steps required within the HR planning process.

Planning can be conducted in various ways. Personal experience has taught me that HR planning requires healthy working partnerships with colleagues from the rest of the organisation. The following are essential steps in the process:

  • Define the organisation’s objectives
  • Define the deadline for delivery of the organisation’s plan
  • Define or validate the role of HR within the organization and the planning process
  • Define HR’s objectives
  • Define the tasks needed to achieve HR objectives
  • Define the tasks HR need to do to support the other functions during the planning cycle
  • Define the inputs and resources that HR require to execute all specified tasks. For example:
    • People, tools and systems
    • Information
      • Sourced internally within HR
      • Sourced internally within the organization
      • Sourced externally
    • Key assumptions
  • Define the detailed schedule that specified who is to do what by when, ensuring that the final plan is scheduled to be delivered before the deadline
  • Make the plan by collecting the input and calculating the figures
  • Review the plan internally
    • Does it correspond to defined objectives? Fine-tune or update if required.
  • Submit the plan for consolidation
  • Management review and feedback
  • Prepare the final plan based on the feedback
  • Get the plan approved by all relevant stakeholders
  • Track the execution and manage performance

For any planning process to be productive, the overall direction for the organisation should be provided by the ultimate decision makers. In some organisations this may be senior management or the owners, in others it is the fund providers, be they investors or governmental bodies.

HR should have a clear picture of the role it is expected to play in its organisation. In established structures and stable environments that role probably does not need to be re-examined in detail very often. However, in companies going through continuous change, it is important to re-evaluate what HR need to be doing in the coming period so that it is clear.

Once the role of HR is validated, objectives will shape the focus of the department. Those objectives should be easy to understand, track and measure. Targets should be stretched but achievable and in line with the values and culture of the organisation.

Objectives will guide task setting. There are tasks related to achieving the objectives of the department and tasks related to planning itself. Both types should be considered in terms of their purpose and required resources.

Key assumptions should be in line with the strategic direction of the organisation and agreed with all relevant departments. For example, does the company want to change any of its existing policies? How many employees would be required? When are new people expected to join? What is the average attrition rate and does the company want that rate to change?

In addition, plans should reflect the latest known legislation. Perhaps the government has changed policy on foreign worker regulations or there is an initiative to change employment related costs. For example, the percentage of national contributions made might change or additional taxation charges may be brought in.

Assumptions that are known or more certain would normally be included in the base plan, while the potential changes can be reflected in the sensitivities. Early visibility enables the company to prepare for potential options in a timely manner.

Costs will reflect the outcome of the assumptions included. Once figures have been calculated, the HR team might ask for modifications if total costs are either too high or too low.

After the HR plan is finalised internally, it is important to see how it fits into the overall plan of the organisation. In many companies that information will only be available after the commercial profit and loss (P&L) has been consolidated. If the forecasted profit is in line with management’s expectations, approval is usually more straightforward. However, if there is a need to revise the plan (i.e. reduce costs), top management will identify the level of profit gap.

This determines whether the HR plan needs to be updated. Organisations are sometimes able to cover a profit gap without re-defining headcount requirements. However, in the case where a reassessment of the HR plan is required, it is more effective if each function or business unit agrees on the level of a necessary reduction. This can then be cascaded down through their organisation so that the plans are revised accordingly.

HR can be proactive and highlight the elements that are critical for successful operations, therefore identifying the costs that need to stay in at the specified value. To get the buy-in for leaving the original cost amount in the plan, it is important to demonstrate the risks associated with cutting or canceling the investment in those crucial elements. If, for instance, lowering the bonus of the key sales force is likely to trigger dissatisfaction and a high volume of attrition, the ultimate cost of sales losses would be much higher than the cost of the bonus.

Once final costs are agreed, the respective total figure is provided to each of the cost center owners and the organisation has its final plan.

In order for the plan to be validated, it is necessary to receive formal approval. There are different approaches that can be taken to obtain HR plan approval.

Within some organisations, approval of the plan is made at one time for the entire company. As such, the HR plan is approved (or not) when the overall plan is, since it is an integral part. Alternatively, in some companies, approval is required form both HR and the relevant business unit heads, even if the costs associated with the plan have been integrated into the approved P&L.

Finally, specific parts of the plan (e.g. new hires and headcount reductions) may require additional validation from particular functions. For example, the legal department may need to input information to ensure that there is no exposure related to proposed staff reductions.

Steps taken during the planning process should contribute to the organisation reaching its goals. Mature organisations might be reluctant to change how they operate, while newly established ones might not be sure they are doing is right. Answering the question “How is this specific task going to help us in achieving our defined objectives” will indicate whether the plan is on the right track. The most important thing is to keep a critical, factual approach and focus on the activities that ultimately bring value.

Last but not least, all of us have witnessed how plans become obsolete not long after they have been finalised, which can be demotivating. To mitigate this, organisations should be allocating efforts appropriately and reducing pressure where feasible. As a saying in the business circles goes - “Do not die on the plan, die on the execution.”

Speaking of execution, once the plan is approved, it is time to put it into practice. Performance management is an integral part of that process and we will soon be exploring this topic in more detail.

Tijana Balotic Truong

Tijana Balotic Truong is a performance management and commercial finance specialist, with 15+ years of international experience in large FMCG companies.

She is strong in risk management and developing business partnering within markets, regions and HQ, and is now helping start-ups and SMEs in the domains of strategy and finance.

Tijana is also active in NGO sector, most recently focusing on enhancing fund raising strategies and programs that improve children well-being.

She is a Chartered Global Management Accountant and a Master of Management.