After the HR planning system has analyzed both the supply of and the demand for future workers, these two forecasts are compared to determine what, if any, action should be taken. Whenever there is a discrepancy between these two estimates, the organization needs to choose a course of action to eliminate the gap.
Action Decisions with a Shortage of Employees
When HR specialists comparing demand with supply find that the supply of workers is less than the demand, several possibilities are open to the organization. If the shortage is small and employees are willing to work overtime, it can be filled with present employees. If there is a shortage of highly skilled employees, training and promotions of present employ- ees, together with the recruitment of less-skilled employees, are possibilities. This decision can also include recalling employees who were previously laid off.
Intense global competition, rapid technological change, and fears caused by recent workforce reductions have also led many organizations to increase their use of part-time workers, subcontractors, and independent professionals in response to changing demands. And, while the number of these contingent workers in the United States has declined slightly, they still constitute a sizable portion of the workforce. In 2009, some experts suggested that contingent workers made up approximately 31 percent of the U.S.
labor force. 20
Using contingent workers gives many organizations more flexibility in dealing with temporary shortages of labor than does maintaining more traditional full-time employees.
From 1990 to 2008, the number of temporary workers in the United States has grown from 1.1 million to 2.3 million. 21 More and more of these temporary jobs are in higher skill oc- cupations like in the legal, business and financial, and computer areas. 22
Action Decisions in Surplus Conditions
When comparison of demand for and supply of employees indicates a surplus, the alterna- tive solutions include attrition, early retirements, demotions, layoffs, and terminations.
Decisions in surplus conditions are some of the most difficult that managers must make, because the employees who are considered surplus are seldom responsible for the condi- tions leading to the surplus. A shortage of a raw material such as fuel or a poorly designed or poorly marketed product can cause an organization to have a surplus of employees.
HRMemo For years, companies tried to recruit college graduates by posting jobs on websites like Monster and CareerBuilder.
Recently, companies like Ernst & Young LLP are setting up sponsored member- ship groups for recruiting on popular social networking sites like Facebook; as of May 2011, 65,000 people have signed up for the group.
Social networks may be the future of online recruitment.
Sources: Alicia Clegg (July 10, 2007), “Talent Hunt in Virtual World Employers Who Marry a Personal Touch with Social Network Websites May Have First Pick of the Best Young Brains,”
Financial Times, p. 16; Erin White (January 8, 2007),
“Theory & Practice:
Employers Are Putting New Face on Web Recruiting,”
The Wall Street Journal, p. B3.
As a first approach to dealing with a surplus, most organizations avoid layoffs by relying on attrition, early retirement, and creation of work, and the like. Many organizations can re- duce their workforce simply by not replacing those who retire or quit (attrition). Sometimes this approach is accelerated by encouraging employees close to retirement to leave early, but there are drawbacks to this approach if the early retirement program is not carefully planned.
First, statistics indicate that workers over 50 tend to be healthier, have fewer work-related injuries, and are less likely to change jobs than their younger counterparts. 23 Also, large amounts of retirements are expected to lead to acute skills shortages that will negatively
Renewed focus on strategic goals, acceleration of regu- latory and legal changes, pressure to increase efficiency and productivity, and continuous effort to reduce costs have forced many organizations to outsource part or all of their HR processes. Defined as contracting with a ser- vice provider to manage people (e.g., recruiting), pro- cesses (e.g., payroll), and technologies (e.g., HRISs) related to a company’s HR functions, HR business pro- cess outsourcing (BPO) is fast becoming a viable option for many firms. As an indication of its growing popular- ity, approximately 85 percent of companies are believed to outsource at least one component of their HR func- tion. Some of the leading HR BPO firms are Aon Hewitt, IBM, ADP, Accenture, and Mercer.
There are several examples of companies that are already outsourcing several aspects of their HR functions.
Prudential Financial Inc. outsourced its human resources information systems and administrative functions at a cost of $700 million over 10 years. The state of Florida outsourced many of its HR activities to Convergys, a deal costing the state a total of $280 million over a seven- year period. PepsiCo entered into a 10-year agreement with HR outsourcing firm Aon Hewitt to delegate its em- ployee benefits administration, payroll, and call center services. The 10-year deal has been said to be valued at
$200 million.
Similarly, International Paper Co. entered into a 10-year, $600 million arrangement to outsource its human resource functions. As with Prudential, Aon Hewitt manages International Paper’s payroll process, benefits administration, relocation and outplacement services, and human resource information services for 70,000 em- ployees and 80,000 retirees. According to Paul Kerre, vice president of human resources, International Paper hired Aon Hewitt because of its guaranteed cost savings, reduc- tions in business IT spending, and experience in manag- ing third party vendors. In 2010, International Paper extended Aon Hewitt’s contract until 2014. Other organi- zations that have outsourced large portions of their human resource departments include Bank of America and Unilever, which signed a seven-year agreement with
Accenture. Accenture provides recruitment, payroll administration, performance management, and several other core HR administration services for Unilever.
To find out if an organization is a candidate for HR outsourcing, ask the following questions:
Question 1 Does the HR department want to focus on core business outcomes?
Question 2 Has the HR department experienced rapid growth that has left your organization with a variety of complex processes?
Question 3 Is the HR budget too constrained to support major technological upgrades or complete system overhauls?
If the answer is yes to any of the questions above, then it may make sense to contact some consulting firms and/or HRBPs to learn more about the HR out- sourcing option.
www.prudential.com www.unilever.com www.aon.com www.accenture.com www.internationalpaper.com
Sources: Ed Frauenheim (March 2010), “Engaged, and at Your Service,” Workforce Management , Vol. 89, Iss. 3, pp. 23–27;
“HR BPO Deals Expensive, Market Shows Potential,” Society for Human Resource Management Online (accessed on May 27, 2011);
“Accenture to Help Unilever Transform Human Resources Oper- ations in 100 Countries with a Seven-Year Outsourcing Agree- ment” (June 6, 2006), Business Wire, p. 1; Gary McWilliams (April 13, 2005), “Business Processes Decline as Share of Outsourcing,” The Wall Street Journal , p. D13; Pamela Babcock (August 2004), “Hewitt and Exult Create Outsourcing Power- house,” HR Magazine , Vol. 49, Iss. 8, pp. 29–31; Denise Pelham (April 2002), “Is It Time to Outsource HR?” Training, pp. 50–52;
Tischelle George (January 2002), “Prudential Outsources HR Systems to Exult,” Informationweek.com; Elisabeth Goodridge (October 2001), “Paper Vendor Outsources HR,” Informa- tionweek.com; Louis Finan, James Konieczny, and Bill Zadell (2000), “For Better or for Worse: Questions for HR Professionals to Ask a Prospective Outsourcing Partner,” Benefits Quarterly, pp. 7–13.
HR Journal HR Business Process Outsourcing: A Fast Growing Trend in the Industry
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affect companies’ ability to compete in the global marketplace. Thus, without proper plan- ning and retention strategies, organizations run the risk of losing their best employees. 24 Second, in the year 2010 the median age of the U.S. workforce was 48.7 years, which means more than half of all U.S. workers will be legally protected by the Age Discrimination in Employment Act. This act permits workers who are 40 years or older to bring lawsuits against their employers for age-based discrimination. From 2000 to 2010, the number of charges of age discrimination filed with the U.S. Equal Employment Opportunity Commission grew from 16,000 to over 23,000. 25 Organizations settled these charges for a 10-year cost of more than $700 million. 26 Thus, organizations will need to be very careful in terms of how they design, encourage, and implement early retirement programs in the future. 27 Third, care must be taken not to offer promises that won’t be kept. Once certain benefits are promised, it may be illegal to change them without approval of the early retirees. 28
If voluntary reductions in force such as early retirement programs aren’t successful in eliminating the gap between forecasted supplies of and demand for human resources, an organization might have to contemplate temporary or permanent layoffs. Statistics indicate the unemployment rate as of April 2011 was 9.0 percent. 29 Since the start of the recession in 2007, it has been estimated that approximately 8.6 million jobs have been lost in the United States. 30
Some experts believe that in recent years, American corporations have too frequently and quickly turned to layoffs and have failed to fully plan for and evaluate the consequences of their actions. For example, research suggests that the survivors of layoffs (i.e., employees who remain employed at the organization) often experience a decrease in morale and produc- tivity after they watch their friends and fellow workers lose their jobs. 31 In addition, data suggest that layoffs do not lead to better financial performance in the long run 32 and poorly planned reductions in the workforce can have disastrous effects on morale. 33
Human Resource Information Systems
It should be obvious by now that the key to successful HR planning is information. All of the activities discussed in this chapter assume that the organization is able to collect, store, and evaluate large amounts of information about the internal and external environments.
For many organizations, mechanical techniques for dealing with these large amounts of information are no longer adequate. Fortunately, there now exist very sophisticated com- puterized systems that allow organizations to cope with these information demands.
A human resource information system (HRIS) is much more than a computerized skills inventory. An HRIS is an integrated approach to acquiring, storing, analyzing, and controlling the flow of information throughout an organization. 34 Highly developed HRISs can be useful in nearly all HRM functions and can greatly increase efficiency and response times of various traditionally labor- and time-intensive human resource activities. 35 The system might contain a program for tracking applicants, a skills inventory, a career plan- ning program, and employee service programs such as an electronic bulletin board. Its applications are, therefore, almost endless. Some of the more popular HRIS software programs include HRSOFT, SAP HR, PEOPLESOFT, and ORACLE HRMS. 36
One of the most common uses of an HRIS is in recruitment and tracking of applicants.
By using its applicant tracking program, along with supply and demand analysis, Tata Consultancy Services of India is able to recruit and train over 25,000 multilingual employ- ees in six months. Given the company’s ability to accomplish this major undertaking, Tata was the winner of the 2010 Optimas Award for General Excellence. 37
Many other organizations have developed highly sophisticated tracking programs, and most of these have proved cost-effective. For example, Merck & Company, Inc., determined that a typical applicant had to fill in his or her social security number on at least 22 different
occasions during the application process. Eliminating this kind of unnecessary redundancy saved the company considerable money. 38 MCI Telecommunications uses SmartSearch, an automated résumé tracking system, to identify qualified applicants quickly and accu- rately. 39 The University of Michigan uses an HRIS to manage the pay, benefits, and pen- sions of current and former faculty and administrators. 40 Each of these companies is convinced that its HR planning has improved with the use of such systems.
In contrast to these relatively specialized HRISs, computer technology has also made it possible for organizations to integrate multiple HR needs into a single system. Apple Com- puter’s system allows employees to enroll in benefit programs directly from their personal computers. Line managers can process traditional employee transactions such as pay in- creases, and they can use learning modules that instruct them in skill improvement programs such as conducting legal performance analysis. 41 Chevron has also moved toward general systems. The company had over 200 different HR systems, most of which couldn’t commu- nicate with one another. Now there is one system with data on all Chevron employees world- wide. The company estimates that it has saved nearly $2,000 per employee by removing these redundancies. And with over 50,000 employees, the savings have been substantial. 42 In contrast either to Apple Computer’s HRIS, which is designed to be used by every employee in the company, or to systems that serve a single function, a third kind of HRIS has been developed specifically for use by upper-level executives. Systems of this third kind are sometimes referred to as executive information systems ( EISs ) . 43 For exam- ple, after a corporate restructuring eliminated several layers of management, Phillips Petro- leum installed an EIS in order to support its managers and increase their span of control.
The company estimates that its system was able to save over $100 million by decentraliz- ing decision making and delivering needed information directly to the managers.
The introduction of computerized HRISs has allowed organizations to broaden their view of replacement planning. Succession planning has become more than simply charting expected replacements for a given position. Many experts now suggest that speci- fying one particular replacement for a specific job is pointless, given the changing nature of business. Rather, succession planning is now considered an integral part of a compre- hensive career planning program, which can be greatly assisted by a computerized HRIS. 44 Several factors are making succession planning for executive-level positions more im- portant than ever before. 45 There are large numbers of aging executives at a point in their career where retirement is a distinct possibility. Some of the more popular HRIS software programs include HRSOFT, SAP HR, PEOPLESOFT, and ORACLE HRMS.46 Of the 500 companies in the Standard and Poor’s Index, 20 percent have CEOs age 63 and older.
And early retirement appears to be an increasingly popular choice among middle-level managers (those who might be expected to ascend to the executive ranks). When AT&T offered its voluntary retirement packages as a staff reduction strategy, 50 percent more middle-level managers accepted the buyout than the company had anticipated. Even chief financial officers (CFOs) are not immune to turnover, which has been reported to be higher than that of chief executive officers (CEOs) in recent years. 47
These statistics are especially sobering when one also considers that recent surveys indicate that a majority of HR executives do not believe that their organizations are adequately prepared for executive turnover because of an absence of effective succession planning. 48 In response, many organizations are creating mentoring or coaching programs in which soon-to-retire executives are paired with junior employees. The nearby Your Career Matters explores how these programs function.
Clearly, succession planning must assume a higher priority in many corporations. In addition, however, many progressive companies now realize that a critical part of any suc- cessful succession plan is a comprehensive retention plan. One way to minimize the need for replacing senior executives is to strategically plan ways to entice them to delay retirement or
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to alter their work arrangements with the company. Research suggests that companies can help encourage employees to work beyond retirement age by offering shorter and more flex- ible work hours, allow more telecommuting, and job sharing.49 Also, corporations such as Chevron, Prudential Insurance, and Monsanto systematically offer consulting and part-time assignments to executives who might otherwise leave the organization. 50 These companies see this type of HR flexibility as an essential part of their future success.
Succession planning is not only a means for dealing with anticipated transitions in ex- ecutive leadership, but also a way of coping with unanticipated departures, either from losses to competitors or to death, which is a reality of an aging executive workforce. This need for better succession planning could not be more immediate when one considers the results of a recent study by Drake Beam Morin (an outplacement and career development consulting group) that approximately half of the CEOs of 450 of the world’s largest corpo- rations held their jobs for less than three years. This, combined with the fact that 35 percent of the largest corporations in the United States replaced their CEOs in 2005, underscores how important it is to develop tomorrow’s leaders. 51
Over the next couple of decades, hundreds of thousands of senior managers and executives will be retiring from all types of organizations, including hospitals, universities, government agencies, and public and private companies.
Many experts are concerned that these retirees will take a great deal of intangible organizational knowledge with them. Examples of their hard-to-replace knowledge might include anything from how to win a large sales contract to how to keep the organization profitable dur- ing a prolonged recession. Two things are certain: These upcoming mass retirements will create skills and knowl- edge shortages, and organizations need to make sure that these intangible skills get “downloaded” to junior employees and managers before it’s too late.
Helping the organization deal with this issue will also help advance your own career. How? By finding a men- tor within the organization. If the organization has a for- mal procedure for matching mentors to mentees, sign up and try the program to see if it meets your needs and expectations. Unfortunately, sometimes the formal match approach does not work out because the mentor is too busy, there’s no chemistry between the mentor- mentee, and so forth. Another approach is to search for your own mentor within the organization. Generally speaking, your immediate supervisor is not always the best choice because there may be things you want to share about your job that could upset him or her; so it is usually a good idea to look for someone that is senior in the organization and not directly linked to your supervi- sor (i.e., your supervisor’s boss).
While it can be difficult to find the right mentor, one possible approach is to strike up conversations with a few different “mentor candidates” when you see them
in the cafeteria, in the hallways, after a meeting, or in the break room. You may want to ask them for their opinion about some challenge you are having at work or a difficult project you’re working on; then listen carefully to how they respond. If they spend more than a few minutes with you giving meaningful and insightful feed- back, that’s usually a good sign that they are taking an interest in you. If they seem rushed and slightly annoyed that you’re asking for their opinion, then chances are they are not interested in mentoring you, at least not right now.
Once you’re reasonably sure that you found some- one from whom you can learn and who seems genu- inely interested in mentoring, then you may want to cultivate your professional relationship with him by dis- cussing additional work challenges, seeking his feed- back, and listening to his advice. If it’s the right mentor, then the relationship will grow and the career benefits will be many. Research suggests that employees who have a good and supportive mentor are more likely to be promoted and make a higher salary within the orga- nization, as well as having the emotional and psycho- logical support that can help employees deal with the stresses of organizational life and politics.
Sources: David D. Dawley, Martha C. Andrews, and Neil S. Bucklew (2010), “Enhancing the Ties That Bind: Mentoring as a Moderator,” Career Development International, Vol. 15, Iss. 3, pp. 259–78; W. Gentry and J. Sosik (2010), “Developmental Relationships and Managerial Promotability in Organizations: A Multisource Study,” Journal of Vocational Behavior, Vol. 77, Iss. 2, pp. 266–78; D. DeLong (2009), “Reducing Risk: Building the Business Case for Investing in Knowledge Retention,” Interna- tional Journal of Human Resources Development and Manage- ment, Vol. 9, Iss. 2/3, pp. 294–99.