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Human Resource Planning
Challenges for Industrial/Organizational Psychologists
Susan E. Jackson and Randall S. Schuler
New York University
A BSTRACT:•Human resource planning has traditionally an organization's effectiveness, it must be integrated with
been used by organizations to ensure that the right person the organization's short-term and longer term business
is in the right job at the right time. Under past conditions objectives and plans.' Increasingly this is being done in
of relative environmental certainty and stability, human leading organizations, although in the past business needs
resource planning focused on the short term and was dic usually defined personnel needs and human resource
tated largely by line management concerns. Increasing planning, which meant that planning became a reactive
environmental instability, demographic shifts, changes in process. The reactive nature of the process went hand-
technology, and heightened international competition are in-hand with a short-term orientation. Now, major
changing the need for and the nature of human resource changes in business, economic, and social environments
planning in leading organizations. Planning is increas are creating uncertainties that are forcing organizations
ingly the product of the interaction between line manage to integrate business planning with human resource
ment and planners. In addition, organizations are real planning and to adopt a longer term perspective. For ex-
izing that in order to adequately address human resource ample, according to Kathryn Connors, vice president of
concerns, they must develop longterm as well as short human resources at Liz Claiborne,
term solutions. As human resource planners involve Human resources is part of the strategic (business) planning
themselves in more programs to serve the needs of the process. It's part of policy development, line extension planning
business, and even influence the direction of the business, and the merger and acquisition processes. Little is done-in the
they face new and increased responsibilities and chal company that doesn't involve us in the planning, policy or final-
lenges. ization stages of any deal. (cited in Lawrence, 1989, p. 70)
In an early treatment of the topic, Vetter (1967) defined John O'Brien, vice president of human resources at
human resource planning as Digital Equipment Corporation, describes an integrated
linkage between business and human resource plans as
the process by which management determines how the orga- one by which human resource and line managers work
nization should move from its current manpower position to jointly to develop business plans and determine human
its desired position. Through planning, management strives to resource needs, analyze the work force profile in terms
have the right number and the right kinds of people, at the right of future business strategies, review emerging human re-
places, at the right time, doing things which result in both the source issues, and develop programs to address the issues
organization and the individual receiving maximum long-run and support the business plans. According to O'Brien,
benefits. (p. 15) such joint efforts occur when human resource planners
Contemporary human resource planning occurs within convince corporate business planners that "human re-
the broad context of organizational and strategic business sources represent a major competitive advantage"
planning. It involves forecasting the organization's future ("Planning with People," 1984, p. 7) that can increase
human resource needs and planning for how those needs profits when managed carefully. This article describes
will be met. It includes establishing objectives and then
developing and implementing programs (staffing, ap- We thank James Walker, two very helpful anonymous reviewers, and
praising, compensating, and training) to ensure that peo- the special issue editors for their comments on previous drafts of this
ple are available with the appropriate characteristics and article. In addition, we thank Henry A. Goodstein, BMR, Inc., and
skills when and where the organization needs them. It Donald K. Brush, the Barden Corporation, for permitting us to quote
may also involve developing and implementing programs our discussions with them, as well as Donald Laidlaw, the IBM Cor-
to improve employee performance or to increase em- poration, and Manuel London, AT&T, for their helpful insights.
Correspondence concerning this article should be addressed to Susan
ployee satisfaction and involvement in order to boost or- E. Jackson, Department of Psychology, 6 Washington Place, New York
ganizational productivity, quality, or innovation (Mills, University, New York, NY 10003.
1 985b). Finally, human resource planning includes gath- ' Throughout this article we use terms such as business objectives
ering data that can be used to evaluate the effectiveness and business needs in a generic sense to refer to the bottom-line criteria
of ongoing programs and inform planners when revisions against which an organization evaluates its performance. Our intention
i n their forecasts and programs are needed. is to include the criteria considered by all types ofemployers, regardless
Because a major objective of planning is facilitating of whether they are for-profit organizations.
February 1990 • American Psychologist 223
Copyright 1990 by the American Psychological Association, Inc. 0003.066X/90/$00.75
Vol. 45, No. 2, 223-239
some of the activities that industrial/organizational (I/O) reading skills, nearly one fourth of the high school grad-
psychologists are engaged in as they seek to improve the uates who entered the Navy read below the 10th-grade
competitiveness of organizations through effective human level (National Alliance of Business, 1986). Such statistics
resource planning. are alarming when compared to projections indicating
Factors Underlying Increased Interest in that the levels of various skills needed for new jobs are
Human Resource Planning likely to increase in the future (see Johnston & Packer,
1987).
Undoubtedly, there are many factors that account for the A consideration of how the values of workers who
increased attention directed to human resource planning, will soon make up the majority of the work force differ
but environmental forces-globalization, new technolo- from those who will begin to leave it suggests additional
gies, economic conditions, and a changing work force- changes on the horizon. There is already evidence of
seem particularly potent (Dumaine, 1989; Dyer & Heyer, growing resistance from employees to relocation. Greater
1984; Greenhalgh, McKersie, & Gilkey, 1986). These emphasis on self-evaluation and a reduction in loyalty
create complexity and uncertainty for organizations. Un- and dedication to employers makes it more difficult for
certainty can interfere with efficient operations, so or- organizations to assume they can move employees around
ganizations typically attempt to reduce its impact; formal anywhere and anytime (Maccoby, 1988; Mills, 1987). A
planning is one common tactic used by organizations to decline in organizational loyalty is occurring at the same
buffer themselves from environmental uncertainty time that workers are feeling insecure about their em-
(Thompson, 1967). ployment (Hay Group, 1988).
The changing characteristics of the work force, which A recent study comparing the work values of those
is but one important environmental factor, make the over 40 years old with those under 40 years old suggested
need for planning evident. Between 1976 and 1980, the other types of changes for which organizations must pre-
labor force grew an average of 2.8%, but between 1991 pare. For example, employees from the younger genera-
and 1995, the rate of growth will drop to 1.1 %. Addi- tion, who grew up during the Vietnam war, do not trust
tionally, whereas more than 3 million people joined the authority as much as do members of the older generation,
labor force in 1978, less than 2 million people are pro- who are products of the World War II era. The younger
jected to enter the labor force each year from 1987 to generation thinks work should be fun, whereas the older
1995. Comparatively, the proportion of younger people generation sees work as a duty and vehicle for financial
(aged 16 to 24) and older people (aged 55 and over) in support. Younger employees believe people should ad-
the work force will decline. People aged 25 to 54 will vance as quickly as their competence permits, whereas
constitute a greater percentage of the labor force, increas- older workers believe that experience is the necessary road
ing from 61% in 1975 to 73% in 1995. The number of to promotion. Finally, this study found that for the youn-
mothers in the work force with children under one year ger generation, "fairness" means allowing people to be
old increased from 42% in 1980 to 55% in 1989. The different, but for the older generation it means treating
ethnic mix of the labor force is also changing. The Bureau people equally ("Work Attitudes," 1986).
of Labor Statistics estimates that ethnic minorities will Changes in the work force are just one aspect of the
account for 57% of the growth in the labor force between environment stimulating the need for human resource
now and the year 2000. Of the approximately 25 million planning. The demographic changes are somewhat pre-
workers added to the work force between 1985 and 2000, dictable, but when they are considered in combination
42% are expected to be native White women and only with changing technology (see Davis & Associates, 1986)
15% are expected to be native White men. Fully 22% are and many of the other external changes described else-
expected to be immigrants (Glickman, 1982; Johnston where in this issue (e.g., by Offermann & Gowing, pp.
& Packer, 1987; "Managing Now," 1988; "Needed," 1988; 95-108), they pose significant challenges for human re-
Nelton, 1988). source planning and contribute to its changing status
All of these demographic projections have significant during the past two decades.
i mplications for managing human resources, thereby in- A Model for Describing Human
creasing the importance of human resource planning Resource Planning
(Coates, 1987; Davis & Associates, 1986). The changing
demographics mean there will be fewer entry-level em- In the remainder of this article, we describe the activities
ployees, so competition among employers will increase. engaged in by human resource planners in leading or-
In addition, the changing demographics signal changes ganizations. Throughout our discussion, we describe four
in the abilities, skills, interests, and values of tomorrow's phases of human resource planning: (a) gathering and
work force. For example, shortages of many types of analyzing data to forecast expected human resource de-
skilled workers are imminent, including tool-and-die mand, given business plans for the future, and to forecast
makers, bricklayers, shipbuilders, mechanics, machinists, future human resource supply; (b) establishing human
and engineers ("Early Retirement," 1987). Even if or- resource objectives; (c) designing and implementing pro-
ganizations are willing to train new employees, the task grams that will enable the organization to achieve its hu-
may be difficult, as the U.S. Navy has found. At a time man resource objectives; and (d) monitoring and evalu-
when many of its training manuals required 12th-grade ating these programs (Burack, 1988; Odiorne, 1981). Ac-
224 February 1990 • American Psychologist
rizons, we do not mean to suggest that organizations seg-
tivities related to the four phases of human resource
planning are described for three different time horizons: regate their planning activities in this fashion. The reality
short term (up to one year), intermediate term (two to is that organizations must integrate their activities across
three years), and long term (more than three years). These the four planning phases as well across all three time ho-
correspond to the typical time horizons for business rizons, as is shown in Figure 1. As the feed-forward and
planning. Using the same conventions that line managers feed-back arrows connecting the four phases of planning
use to distinguish between activities with differing time illustrate, planning activities within a time horizon are
horizons is one step human resource planners can take linked together into a dynamic system. Early phases (e.g.,
to facilitate integration of their efforts with the needs of demand and supply forecasts) serve as inputs to later
the business (Hennecke, 1984; Migliore, 1984, 1986; phases (e.g., setting objectives). Equally important, or-
Walker, 1978). ganizations can-learn-from the results generated during
Although the four phases of human resource plan- the evaluation phase and then apply what is learned to
ning are conceptually the same regardless of the time make adjustments in objectives and programs.
horizon, there are practical differences in the operation- In addition to the arrows linking the four phases of
alization of the four phases as the time horizon is ex- planning within each time frame, Figure 1 includes arrows
tended. Therefore, we describe the activities related to to illustrate (a) how longer term objectives can influence
planning for each time horizon separately and in turn, shorter term planning (dotted-line arrows), (b) how
beginning with short-term planning. We begin with the shorter term evaluation results can influence projections
shorter term planning horizon because historically the about future human resources and programs designed to
activities of many I/O psychologists have been carried meet future demands, and (c) how the results achieved
out for the purpose of achieving shorter term objectives. through the implementation of human resource programs
As organizations and I/O psychologists began to recognize can influence business plans. The arrows connecting
the potential benefits of engaging in longer term planning, planning activities for different time horizons are impor-
however, consideration of longer term issues became more tant to note because they emphasize that planning for
common. As a result, as is described near the end of this one time horizon typically has implications for another.
article, many I/O psychologists are now engaged in ac- For example, long-term planning almost always prompts
tivities designed to prepare organizations for the 21st the development of programs that need to be imple-
century. mented in the short term and intermediate term. In ad-
In separating our discussion of the phases of human dition, the evaluation results obtained for shorter term
resource planning activities according to three time ho- programs often lead to reevaluation of longer term pro-
Figure 1
Dynamic Linkages Among Components of a Fully Integrated System of Business and Human Resource Planning
CONTENT OF HR SYSTEM MR PLANNING ACTIVITIES TIME NORIZDI(
Projected Assess OR Develop Design & Evaluate Long Term
Enuironmental Conditions Demand V Objectives I mplement Outcomes (3+ Years)
Competitive Strategy Supply Programs
Life Cycle Stage
Industry Sector 4 I
4
I I l:i Intermediate-Term
Projected Assess NO Develop Design & Evaluate (2-3 Years)
Enuironmental Conditions Demand S Objectives I mplement Outcomes
-Competitive Strategy Supply 1 Programs
-Life Cycle Stage I
-industry Sector t
4 I I I I
+ i +
Projected Assess HR Develop Design li Evaluate Short-Term
Enuironmental Conditions Demand 8 Objectives I mplement Outcomes (1 Year)
Competitive Strategy Supply Programs
Life Cycle Stage
-industry Sector
February 1990 • American Psychologist 225
jections about the availability of human resources, which combined with employee surveys designed to assess at-
in turn may prompt adjustments in programs designed titudinal predictors of turnover (e.g., job satisfaction) also
to meet longer term needs. The ideal is to have full in- help I/O psychologists and human resource planners pre-
tegration among all types of human resource planning dict how many currently filled positions are likely to be-
activities as well as integration between human resource come vacant. Such information can produce useful pre-
and business planning (Walker, 1988). dictions when the organizational unit of interest is large,
Short-Term Human Resource Planning although making predictions about precisely which po-
sitions are likely to become vacant is less precise. Predic-
Many I/O psychologists work on activities related to de- tions about how many and what types of jobs will be
signing and implementing programs (e.g., recruitment, eliminated or created in the short term generally follow
selection systems, and training programs) to meet short- directly from business plans submitted by line managers.
term organizational needs. Such activities generally in- How and where will we get people to fill and vacate
volve an element of planning in that they are future-ori- jobs? The first step in answering this question-the sup-
ented to some extent. Even projects for which objectives ply question-involves determining the desired charac-
are expected to be achieved in as little time as a few teristics of employees who fill (or vacate) the jobs of in-
months have, ideally, been designed with an understand- terest. Then the availability of those characteristics in the
ing of how the short-term objectives are linked to the organization's current work force and in the external labor
achievement of longer term objectives. For example, an market must be assessed. The particular characteristics
aeronautics company engaged in a recruitment campaign of current and potential employees that are inventoried
to hire 100 engineers should have a clear understanding and tracked by human resource planners are influenced
of how this hiring goal will help the company achieve by the nature of the organization and the environment
long-term goals such as becoming the world's most in- in which it operates. For example, for human resource
novative company in that industry. This hypothetical planners in growing organizations, simply finding people
company also might have a college recruiting drive de- with the needed skills and abilities is likely to be a top
signed to find 75 college graduates to enter a training priority. For planners in mature and declining organi-
program in recognition of the fact that a growing com- zations, the costs (e.g., salary level) associated with em-
pany needs to prepare for the middle managers it will ployees become more salient, especially if work-force re-
need 5 to 7 years hence, as well as the top level managers ductions are needed. Thus it is important for the human
it will need in 10 to 15 years. As this hypothetical example resource planner to know the business needs and char-
highlights, in order for a clear linkage to exist between acteristics of the organization. This knowledge is gained
human resource planning and strategic business planning, by human resource planners meeting with line managers
it is essential that an organization's top executives have to discuss their business plans as well as their human
a fully articulated vision for the future, which has been resource needs. The process of discussion increases the
communicated and accepted by managers throughout the accuracy of supply and demand forecasts and facilitates
organization. the establishment of human resource objectives (see
Forecasting Demand and Supply Schuler, 1988).
In a short-term time horizon, demand and supply of hu- Establishing Objectives
man resources can be predicted with some certainty. Hu- With a short-time horizon, objectives are often easy to
man resource objectives follow logically from consider- state in quantifiable terms. Examples of short-term hu-
ation of any discrepancies between demand and supply. man resource objectives include increasing the number
Demandrefers to the number and characteristics (e.g., of people who are attracted to the organization and apply
skills, abilities, pay levels, or experience) of people needed for jobs (increase the applicant pool); attracting a different
for particular jobs at a given point in time and at a par- mix of applicants (with different skills, in different loca-
ticular place. Supply refers to both the number and char- tions, etc.); improving the qualifications of new hires; in-
acteristics of people available for those particular jobs. creasing the length of time that desirable employees stay
Salient questions are "What jobs need to be filled (or with the organization; decreasing the length of time that
vacated) during the next 12 months?" and "How and undesirable employees stay with the organization; and
where will we get people to fill (or vacate) those jobs?" helping current and newly hired employees quickly de-
What jobs need to be filled and vacated? Answering velop the skills needed by the organization. Such objec-
the demand question involves predicting who will leave tives can generally be achieved in a straightforward way
jobs and create vacancies, which jobs will be eliminated, by applying state-of-the-art human resource management
and which new jobs will be created. One method for pre- techniques and working with line managers to ensure
dicting both vacancies and job growth is to project his- agreement with and understanding of the program ob-
torical trends into the future. This is particularly relevant jectives.
for organizations affected by regular, cyclical fluctuations Design and Implementation of ShortTerm Programs
in demand for their products or services. Behavioral the-
ories of the causes of turnover (e.g., Mobley, Griffeth, The technical skills of I/O psychologists are often applied
Hand, & Meglino, 1979; Mowday, Porter, & Steers, 1982) to short-term program design and implementation. For
226 February 1990 • American Psychologist
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