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ics, which in turn has led to dramatic increases in wages for individuals with these skills.13 Employers that adopt new technology for any aspect of their operations will also have to consider how to tap into labor markets that have these new skills.

Labor Unions
Labor unions are legally protected entities that organize employees and bargain with management to establish terms and conditions of employment via a labor contract. About 12% of the labor force is unionized, with 7.4% unionization in the private sector and 36% in the public sector.14 Trends suggest a continued decline in private sector unionization as well as an increasing level of public sector unionization.15
Labor and management are required to bargain in good faith to try to reach agreement on the contract. Many staffing issues may be bargained, including staffing levels, location of facilities, overtime and work schedules, job descriptions and classifications, seniority provisions, promotions and transfers, layoffs and terminations, hiring pools, KSAO requirements, grievance procedures, alternative dispute resolution procedures, employment discrimination protection, and, very important, pay and benefits. Virtually all aspects of the staffing process are thus affected by negotiations and the resultant labor agreement.
Labor unions thus have direct and powerful impacts on staffing and other HR systems. Even in nonunion situations the union influence can be felt through "spillover effects" in which management tries to emulate the pay and benefits, as well as staffing practices, found in unionized settings.


Human resource planning (HRP) is a process and set of activities undertaken to forecast an organization's labor demand (requirements) and internal labor supply (availabilities), to compare these projections to determine employment gaps, and to develop action plans for addressing these gaps. Action plans include staffing planning to arrive at desired staffing levels and staffing quality.
A general model depicting the process of HRP is presented first, followed by an operational example of HRP. Detailed discussions of the major components of HRP are then given.16

rocess and Example
The basic elements of virtually any organization's HRP are shown in Exhibit 3.5. As can be seen, the HRP process involves four sequential steps: 1. Determine future HR requirements 2. Determine future HR availabilities 3.



Learning Objectives and Introduction
Learning Objectives Introduction
External Influences
Economic Conditions Labor Markets Technology Labor Unions
Human Resource Planning
Process and Example Initial Decisions Forecasting HR Requirements Forecasting HR Availabilities Reconciliation and Gaps
Staffing Planning
Staffing Planning Process Core Workforce Flexible Workforce Outsourcing
Diversity Planning
Demography of the American Workforce Business Case for Diversity Planning for Diversity
Legal Issues
Affirmative Action Plans Legality of AAPs and Diversity Programs ||EEO and Temporary Workers
Discussion Questions


Learning Objectives

• Recognize external influences that will shape the planning process • Understand how strategic plans integrate with staffing plans * Become familiar with statistical and judgmental techniques for forecasting HR requirements and availabilities * Know the similarities and differences between replacement and succession planning * Understand the advantages and disadvantages of core workforce, flexible workforce, and outsourcing strategies for different groups of employees • Learn how to incorporate diversity into the planning process • Recognize the fundamental components of an affirmative action plan

Human resource (HR) planning is the process of forecasting the organization's future employment needs and then developing action plans and programs for fulfilling these needs in ways that align with the staffing strategy. HR plans form the basis of all other activities conducted during staffing. An organization that thoroughly considers its staffing needs and how these needs fit with the external environment will find it much easier to recruit the right number and type of candidates, develop methods for selecting the right candidates, and evaluate whether its programs are successful.
In a nutshell, HR planning involves learning about the employment environment, determining how many employees an organization will need in the future, and assessing the availability of employees in both the internal and external markets. The HR planning process involves several specific components that we cover in this chapter, including making initial planning decisions, forecasting HR requirements and availabilities, determining employee shortages and surpluses, and developing action plans.
The chapter begins with an overview of external influences on the HR planning process, like labor markets, technology, and unions. Next, we provide an overview of the process of HR planning, including a review of methods for forecasting HR requirements and availability. The staffing planning process includes distinguishing between the core and flexible workforces, as well as understanding the environment for outsourcing. Diversity programs have become an increasingly important part of the staffing planning process, so they are also discussed. The major legal issue for HR staffing planning is that of affirmative action plans (AAPs). A different legal issue, that of equal employment opportunity (EEO) coverage for temporary employees and their agencies, is also discussed.


There are four major sources of external influence on HR and staffing planning, namely, economic conditions, labor markets, technology, and labor union*. Exhibit 3.1 provides specific examples of these influences, which are discussed next.

Economic Conditions
Numerous macro forces operate to determine the overall economic climate in which the organization functions. These include product and labor market competition (both national and global), inflation, interest rates, currency exchange rates, and government fiscal and monetary policy. Resulting from such forces is the degree of overall economic expansion or contraction.
A direct derivative of expansion and contraction forces is the amount of job ere-ation and growth, both positive and negative. Positive job growth means expanding job opportunities for individuals, while slowdowns or contractions in job growth yield dwindling job opportunities. Organizations move people into (new hires), within (internal labor markets), and out of (turnover) the organization at varying

Examples of External Influences on Staffing
Labor demand: employment patterns, KSAOs sought
Labor supply: labor force, demographic trends, KSAOs available
Labor shortages and surpluses
Employment arrangements

Elimination of jobs
Creation of jobs
Changes in skill requirements

Labor contracts: staffing levels, staffing quality, internal movement Grievance systems

rates, depending on the amount of job growth. Job growth thus functions like a spigot governing the movement of people.
Consider the case of job expansion. When new jobs are created, new hire rates increase for both entry-level and higher-level jobs. These new hires are either new entrants into the labor force (e.g., recent college graduates) or current members of the labor force, both unemployed and employed. There will also be increased movement within organizations' internal labor markets through the operation of their promotion and transfer systems. This movement will be necessitated by a combination of new jobs being created that will be filled internally and the exit of current employees from the organization. Most likely, the departure of employees will be due to their taking new jobs at other organizations. Some, however, may be temporarily unemployed (while they look for new job opportunities), and others may leave the labor force entirely.
With lesser rates of job growth or actual job contraction, the movement flows are lessened. Organizations will hire fewer people, and job seekers will have longer searches and fewer opportunities to choose from. Promotion and transfer opportunities for current employees will dry up, voluntary turnover rates will decrease, and many employees may even be terminated through involuntary layoff or a voluntary early retirement program. The "great recession" of 2008 resulted in a massive decrease in job openings and employment levels that will continue to plague the economy for years to come.1

In and through labor markets, organizations express specific labor preferences and requirements (labor demand), and persons express their own job preferences and requirements (labor supply). Ultimately, person/job matches occur from the interaction of the demand and supply forces. Both labor demand and supply contain quantity and quality components, as described below. Labor shortages and surpluses, and a variety of possible employment arrangements are also discussed.

Labor Demand: Employment Patterns
Labor demand is a derived demand, meaning it is a result of consumer demands for the organization's products and services. The organization acquires and deploys its workforce in ways that allow it to respond to consumer demand in a competitive manner.
To learn about labor demand, national employment statistics are collected and analyzed. They provide data about employment patterns and projections for industries, occupations, and organization size.
Projections to year 2018 indicate that most job growth will occur in the services sector, led by the education and health services industries, followed by business and professional services. Manufacturing and federal government employment will remain steady, and declines will occur in mining and agriculture.2

Employment growth to 2018 will vary across occupations, with most of the growth concentrated in health care and information technology, and most of the losses concentrated in clerical and manufacturing. Examples of growth "winners" include veterinarians (33%), medical assistants (34%), computer software engineers (34%), home health aides (49%), and personal financial advisors (41%). Examples of growth "losers" include file clerks (-23%), sewing machine operators (-34%), machine feeders and offbearers (-22%), and computer operators (-19%).

Labor Demand: KSAOs Sought
Knowledge, skill, ability, and other characteristics (KS AO) requirements or preferences of employers are not widely measured, except for education requirements. Data collected by the Bureau of Labor Statistics suggest a continued increase in demand for individuals with college degrees or more. The number of jobs requiring a bachelor's degree is expected to increase 17%, the number requiring a master's degree is expected to increase 19%, and the number requiring a doctoral degree is expected to increase 22%. By contrast, the number of jobs requiring only short-term on-the-job training is expected to increase by only 9%.3 The increasing demand for education most likely reflects advances in technology that have made many jobs more complex and technically demanding.4
A very thorough and systematic source of information about KSAOs needed for jobs is the Occupational Outlook Handbook (available at It does not indicate KSAO deficiencies; rather, it provides detailed information about the nature of work and the training and KSAOs required for the entire spectrum of occupations in the United States. A survey of HR professionals and employees revealed that critical thinking skills, creativity, diversity, ethics, and lifelong learning were seen as especially relevant skills for today's employees.5
Survey results show that employers have multiple general KSAO requirements that accompany their quantitative labor requirements. Naturally, the more specific requirements vary according to type of employer and type of job. It also appears that employers have identified general future KSAO needs for their workforces from the skill gaps in their current workforces and, in the case of managers, what their projected critical KSAO requirements will be.

Labor Supply: The Labor Force and Its Trends
Quantity of labor supplied is measured and reported periodically by the Bureau of Labor Statistics in the US Department of Labor. An example of basic results for July 2005 through 2010 is given in Exhibit 3.2. It shows that the labor force, including both full- and part-time employees, reached about 154 million individuals (employed and unemployed) and that unemployment ranged from 4.4% to 9.7%. The data for 2009 to 2010 clearly show the effects of a major economic slowdown.
Data reveal several labor force trends that have particular relevance for staffing organizations. Labor force growth is slowing, going from an annual growth rate of

EXHIBIT 3.2 Labor Force Statistics
150 143 7.3 77 66 4.9
152 145 6.7 78 66 4.4
155 147 9.4 78 63 6.0
154 140
65 9.4
154 139 14.6 84 65 9.7
153 146
7,0 79 66
Civilian noninstitutional population (in millions)
Civilian labor force (in millions) Employed (in millions) Unemployed (in millions) Not in labor force (in millions) Labor force participation rate (%) Unemployment rate (%)

Source: US Department of Labor, "The Employment Situation," July 2005, July 2006, July 2007, July 2008, July 2009, July 2010.

around 2% in the early 1990s to a projected rate of 1.0% by the year 2018. There are increasingly fewer new entrants to the labor force. This trend, coupled with the severe KSAO deficiencies that many of the new entrants will have, creates major adaptation problems for organizations.
Demographically, the labor force has become more diverse, and this trend will continue. Data starting in the 1980s and projected through 2018 show a slow trend toward nearly equal labor force participation for men and women, a slight decrease in the proportion of whites in the workforce, and large proportional growth in the representation of Hispanics and Asians. There will also be a dramatic shift toward fewer younger workers and more workers over the age of 55.
Other, more subtle labor force trends are also under way. There has been a slight upward movement overall in the average number of hours that people work and a strong rise in the proportion of employees who work very long hours in certain occupations, such as managers and professionals. Relatedly, there is an increase in multiple job holding, with 6.2% of employed people holding more than one job. The number of immigrants in the population is growing; nearly 1 in 10 people is foreign born, the highest rate in more than 50 years. New federal and state policies are increasingly pushing welfare recipients into the labor force, and they are mostly employed in low-wage jobs with low educational requirements. People historically out of the labor force mainstream—such as those with disabilities and the growing number of retirees—may assume a greater presence in the labor force.6

Labor Supply: KSAOs Available
A survey of 431 HR professionals found that 40% of employers indicated that high school graduates lack basic skills in reading comprehension, writing, and math required for entry-level jobs, and that 70% of employers said high school graduates are deficient in work habits such as professionalism, critical thinking, personal accountability, and time management.7 Most respondents believed that college graduates were somewhat better prepared for work, but 44% of applicants with college degrees were still rated as having poor writing skills. There are also shortages of employees with the high skill levels required in contemporary manufacturing environments.8 Economists and sociologists are quick to note that these skills shortages are being reported despite consistent gains in standardized test scores and educational attainment in the labor force since the 1960s.9 Thus, it appears that the problem is that demand for advanced skills is increasing, as we noted earlier, and not that the supply of skilled workers is decreasing. This idea is reinforced by another survey of 726 HR professionals that found 98% of respondents reported that the competition for talented workers has increased in recent years.10 Data such as these reinforce the serious KSAO deficiencies reported by employers in at least some portions of the labor force.

Labor Shortages and Surpluses
When labor demand exceeds labor supply for a given pay rate, the labor market is said to be "tight" and the organization experiences labor shortages. Shortages tend to be job or occupation specific. Low unemployment rates, surges in labor demand in certain occupations, and skill deficiencies all fuel both labor quantity and labor quality shortages for many organizations. The shortages cause numerous responses: * Increased pay and benefit packages * Hiring bonuses and stock options * Alternative work arrangements to attract and retain older workers * Use of temporary employees * Recruitment of immigrants * Lower hiring standards * Partnerships with high schools, technical schools, and colleges * Increased mandatory overtime work * Increased hours of operation
These types of responses are lessened or reversed when the labor market is "loose," meaning there are labor surpluses relative to labor demand.

Employment Arrangements
Though labor market forces bring organizations and job seekers together, the specific nature of the employment arrangement can assume many forms. One form is whether the person will be employed on a full-time or part-time basis. Data show that about 83% of people work full time and 17% work part time.11 Although many

people prefer part-time work, approximately 23% of part-time workers are seeking full-time employment.
A second arrangement involves the issue of flexible scheduling and shift work. The proportion of the workforce covered by flexible shifts has steadily grown from 12.4% in 1985 to 27.5% in 2004. Many of these workers are covered by formal flextime programs. Work hours are often put into shifts, and about 15% of full-time employed adults work evening, night, or rotating shifts.12
Two other types of arrangements, often considered in combination, are (1) various alternative arrangements to the traditional employer-employee relationship, and (2) the use of contingent employees. Alternative arrangements include the organization filling its staffing needs through the use of independent contractors, on-call workers and day laborers, temporary help agency employees, and employees provided by a contract firm that provides a specific service (e.g., accounting). Contingent employees do not have an explicit or implicit contract for long-term employment; they expect their employment to be temporary rather than long term.
National data on the use of alternative employment arrangements and contingent employees are shown in Exhibit 3.3. It can be seen that 89.3% of surveyed individuals worked in a traditional employer-employee arrangement, and the vast majority of these (97.1%) considered themselves noncontingent. The most prevalent alternative was to work as an independent contractor (7.5%), followed by on-call employees and day laborers (1.7%), temporary help agency employees (.9%), and employees provided by a contract firm (.6%). The percentage of contingent employees in these alternative arrangements ranged from 3.4% (independent contractors) to 60.7% (temporary help employees).

EXHIBIT 3.3 Usage of Alternative Employment Arrangements and Contingent Workers


Total (millions) Percent Percent Percent
Contingent Noncontingent

Alternative Arrangements Independent contractor
On-call workers and day laborers Temporary help agency workers Workers provided by contract firm
Traditional Arrangements

10.3 2.4 1.2 .8

7.5 1.7 .9 .6 89.3

3.4 24.6 60.7 19.5

96.6 75.4 39.3 80.5 97.1



Source: US Department of Labor, Bureau of Labor Statistics, Contingent and Alternative Employment Arrangements, Feb. 2005.
EXHIBIT 3,4 Major Workforce Trends * Incrtafing number of workers over the age of 55 will mean higher health care costs for employer!/ threatening economic competitiveness * Continue) threat of recession or poor economic conditions globally * Changing attitude* toward retirement, especially an increased tendency for retirees to remain in the workforce to some extent * Change* in technology will lead to changes in skills demanded by employers * federal health care legislation * Increased COStt of health care for employers due to increased employee demand for insurance programs and increased premiums from insurance companies * Demographic shifts will lead to a shortage of skills, especially for jobs requiring high skill levels SoijmC \* Schramm, Workplace Forecast, 2008 (Alexandria, VA: Society for Human Resource Management, 2008),

Exhibit 3.4 shows several other workforce trends identified in a survey of 1,232 HR professionals.

Change** in technology can influence the staffing planning process significantly. In some cases, technology can serve as a substitute for labor by either eliminating or dramatically reducing the need for certain types of workers. As we noted earlier, the economy as a whole has shown decreased demand for positions like clerical workers, telephone operators, and many manufacturing operators as technology has replaced labor as an input to production. Ironically, changes in software that have made computers easier for nonspecialists to use have eliminated many jobs in computer programming.
At the same time, technology can serve to create new jobs as new business opportunities emerge. In place of the jobs that are eliminated, demand for technical occupations like robotics engineers, systems and database analysts, and software engineer* has increased. The expansion of e-commerce and other Internet-based services has increased demand for those who design and manage websites. Increasing productivity as a result of technological change can also spur increased firm performance, and this will, in turn, create more jobs. Often these new jobs will require a completely different set of KSAOs than previous jobs, meaning that increased staffing resources will have to be devoted to either retraining or replacing the current workforce. Research conducted in both the United States and Germany shows that computerization has led to an increase in the demand for highly educated specialists, leading to an overall increased market demand for skills in science and mathematics, which in turn has led to dramatic increases in wages for individuals with these skills.13 Employers that adopt new technology for any aspect of their operations will also have to consider how to tap into labor markets that have these new skills.

Labor Unions
Labor unions are legally protected entities that organize employees and bargain with management to establish terms and conditions of employment via a labor contract. About 12% of the labor force is unionized, with 7.4% unionization in the private sector and 36% in the public sector.14 Trends suggest a continued decline in private sector unionization as well as an increasing level of public sector unionization.15
Labor and management are required to bargain in good faith to try to reach agreement on the contract. Many staffing issues may be bargained, including staffing levels, location of facilities, overtime and work schedules, job descriptions and classifications, seniority provisions, promotions and transfers, layoffs and terminations, hiring pools, KSAO requirements, grievance procedures, alternative dispute resolution procedures, employment discrimination protection, and, very important, pay and benefits. Virtually all aspects of the staffing process are thus affected by negotiations and the resultant labor agreement.
Labor unions thus have direct and powerful impacts on staffing and other HR systems. Even in nonunion situations the union influence can be felt through "spillover effects" in which management tries to emulate the pay and benefits, as well as staffing practices, found in unionized settings.


Human resource planning (HRP) is a process and set of activities undertaken to forecast an organization's labor demand (requirements) and internal labor supply (availabilities), to compare these projections to determine employment gaps, and to develop action plans for addressing these gaps. Action plans include staffing planning to arrive at desired staffing levels and staffing quality.
A general model depicting the process of HRP is presented first, followed by an operational example of HRP. Detailed discussions of the major components of HRP are then given.16

Process and Example
The basic elements of virtually any organization's HRP are shown in Exhibit 3.5. As can be seen, the HRP process involves four sequential steps: 1. Determine future HR requirements 2. Determine future HR availabilities 3.
EXHIBIT 3.5 The Basic Elements of Human Resource Planning

(1) Forecast Labor Requirements
(2) Forecast Labor Availabilities

(3) Determine Gaps

>• (4) Develop Action Plans

3. Reconcile requirements unci availabilities—that is, determine gaps (shortages and surpluses) between I he two 4. Develop action plans to close the projected gaps
An example of HRP, including results from forecasting requirements and availabilities, is shown in Exhibit 3.6. The exhibit shows a partial HRP being conducted by an organization for a specific unit (sales and customer service). It involves only two job categories (A, sales, and B, customer service) and two hierarchical levels for each category (I, entry level, and 2, manager level). All of the HRP steps are confined to this particular organizational unit and its job categories/levels, as shown.
The current workforce size (number of employees) is given for each job category/level. Requirements and availabilities are forecast for one year, and the results are shown in the relevant columns. After the reconciliation process, final gap figures are agreed on and entered into the gap column. It can be seen that there is an overall estimated shortage of 145 employees and that the shortage is very unevenly distributed across the four job categories/levels. Three areas show projected shortages of 39, 110, and 3, and the fourth area shows a projected surplus of 7.
These gap data serve as the basic input to action planning. Because the gaps show both shortages and a surplus, and because the gaps vary in severity relative to the current workforce, a specific action plan will probably have to be developed and implemented for each job category/level. The resultant four staffing (and other) plans hopefully will bring staffing into an orderly balance of requirements and availabilities over the course of the planning period.
The above process and example identify and illustrate the rudiments of HRP. Within them are several distinct components that require elaboration. We turn now to these components, emphasizing that each one represents a factor that must be considered in HRP and that specific choices must be made regarding the operational details for each component.

EXHIBIT 3.6 Operational Format and Example of Human Resource Planning

| | Forecast for Workforce— | | | Job Category | Current | One Year | Reconciliation | | and Level | Workforce | Requirements | Availabilities | and Gaps | Action Planning | A1 (Sales) | 100 | 110 | 71 | - 39 (shortage) | Recruitment | | | | | | Selection | A2 (Sales manager) | 20 | 15 | 22 | + 7 (surplus) | Employment | | | | | | Retention | B1 (Customer service | 200 | 250 | 140 | — 110 (shortage) | Compensation | representative) | | | | — 3 (shortage) | Training and | B2 (Customer service | 15 | 25 | 22 | | development | manager) | | | | | | | 335 | 400 | 255 | -145 (shortage) | |
Organizational Unit: Sales and Customer Service

H m 70

2 b" 5 s PART 1 WO Support Atmvit i

Initial Decisions

Before ItRI* per He can be undertaken, several critical decisions must be made* These decisions will shape the nature of the resultant HRP process* and they will influence tlli output of the process, namely, the gap estimates. The quality and potential effectiveness of the action plans developed from the gap estimates ftft thus ft! make when initial decisions are confronted and made.

Strategic Planning It is always a good idea to have a close, reciprocal linkage between business strat- egy and HR plans,17 Managers engaged in HRP should be aware of environmen- tal contingencies and strategic goals that will affect the size of various business units, Changes in technology and strategy will also impact the KSAOs that will be needed in the future. When HRP takes place as an integral part of an organisa- tion's strategic planning process, it is referred to as plan-based HRP. This is a wise approach because it helps integrate the organization's strategic planning process with HR implications. ?• | However, not all important business developments are captured in formal busi- ness plans, particularly if they occur rapidly or unexpectedly. Sudden changes in consumer preferences or legal requirements, for example, can wreak havoc on business plans. Organizational responses to these changes often occur in the form of special projects, rather than in changes to the total business plan. Part of each response requires consideration of HR implications, however, resulting in what is called project-based HRP. This type of planning helps ensure that the necessary creation of new jobs, changes in requirements and rewards for existing jobs, and employee job changes are undertaken systematically and without undue interruption. >
In addition, many organizations do HRP outside the formal planning cycle for critical groups of employees on a regular basis. This often occurs for jobs in which there are perennial shortages of employees, both externally and internally. Examples here include nurses in health care organizations, faculty in certain specialized areas at colleges and universities, and teachers in elementary and secondary schools. Planning focused on a specific employee group is referred to as population-based HRR |

H A firm grasp of an organization's internal environment is also important. Thus, planners must be out and about in their organizations, taking advantage of opportunities to learn what is going on. Informal discussions with key managers can help, as can employee attitude surveys and the monitoring of key indicators such as employee performance, absenteeism, turnover, and accident rates. Special interest should be paid to recurring difficulties that threaten to interfere with the attainment of future business plans or other important organizational goals. High turnover in a sales organization, for example, is likely to threaten the viability of a business plan that calls for increased sales quotas or the rapid introduction of several new products.

The values and attitudes of managers, especially top managers, toward HR are also important to HRP. Trouble brews when these are inconsistent with the organization's business plans. For example, a midsized accounting firm may have formulated a business plan calling for very rapid growth through aggressive marketing and selected acquisitions of smaller firms, but existing management talent may be inadequate to the task of operating a larger, more complex organization. Moreover, there may be a prevailing attitude among the top management against investing much money in management development and against bringing in talent from outside the firm. This attitude conflicts with the business plan, requiring a change in either the business plan or attitudes.

Planning Time Frame
Since planning involves looking into the future, the logical question for an organization to ask is, How far into the future should our planning extend? Typically, plans are divided into long term (three years and more), intermediate (one to three years), and short term (one year or less). Organizations vary in their planning time frame, often depending on which of the three types of HRP is being undertaken.
For plan-based HRP, the time frame will be the same as that of the business plan. In most organizations, this is between three and five years for so-called strategic planning and something less than three years for operational planning. Planning horizons for project-based HRP vary depending on the nature of the projects involved. Solving a temporary shortage of, say, salespeople for the introduction of a new product might involve planning for only a few months, whereas planning for the start-up of a new facility could involve a lead time of two or more years. Population-based HRP will have varying time frames, depending on the time necessary for labor supply (internal as well as external) to become available. As an example, for top-level executives in an organization, the planning time frame will be lengthy.

Job Categories and Levels
The unit of HRP and analysis is composed of job categories and hierarchical levels among jobs. These job category/level combinations, and the types and paths of employee movement among them, form the structure of an internal labor market. Management must choose which job categories and which hierarchical levels to use for HRP. In Exhibit 3.6, for example, the choice involves two jobs (sales and customer service) and two levels (entry and manager) for a particular organizational unit.
Job categories are created and used on the basis of the unit of analysis for which projected shortages and surpluses are being investigated. Hierarchical levels should be chosen so that they are consistent with or identical to the formal organizational hierarchy. The reason for this is that these formal levels define employee promotions (up levels), transfers (across levels), and demotions (down levels). Having

gap information by level facilitates planning of internal movement programs within the internal labor market. For example, it is difficult to have a systematic promotion-from-within program without knowing probable numbers of vacancies and gaps at various organizational levels.

Head Count (Current Workforce)
Exactly how does an organization count the number of people in its current workforce for forecasting and planning purposes? Sometimes it makes sense to simply count the number of employees on payroll at the start of the planning period. However, there are times when other methods of assessing head count might be preferable.
To account for the amount of scheduled time worked by each employee, an employee head count may be made and stated in terms of full-time equivalents, or FTEs. To do this, simply define what constitutes full-time work in terms of hours per week (or other time unit), and count each employee in terms of scheduled hours worked relative to a full workweek. If full time is defined as 40 hours per week, a person who normally works 20 hours per week is counted as a .50 FTE, a person normally working 30 hours per week is a .75 FTE, and so on. It is also often advisable to take current authorized vacancies into account when assessing head count.

Roles and Responsibilities
Both line managers and staff specialists (usually from the HR department) become involved in HRP, so the roles and responsibilities of each must be determined as part of HRP. Most organizations take the position that line managers are ultimately responsible for the completion and quality of HRP, but the usual practice is to have HR staff assist with the process.
Initially, the HR staff takes the lead in proposing which types of HRP will be undertaken and when, and in making suggestions with regard to comprehensiveness, planning time frame, job categories and levels, and head counts. Final decisions on these matters are usually the prerogative of line management. Once an approach has been decided on, task forces of both line managers and HR staff people are assembled to design an appropriate forecasting and action planning process and to do any other preliminary work.
Once these processes are in place, the HR staff typically assumes responsibility for collecting, manipulating, and presenting the necessary data to line management and for laying out alternative action plans (including staffing plans). Action planning usually becomes a joint venture between line managers and HR staff, particularly as they gain experience with, and trust for, one another.

Forecasting HR Requirements
Forecasting HR requirements is a direct derivative of business and organizational planning. As such, it becomes a reflection of projections about a variety of factors,

such as sales, production, technological change, productivity improvement, and the regulatory environment. Many specific techniques may be used to forecast HR requirements; these are either statistical or judgmental in nature, and they are usually tailor-made by the organization.

Statistical Techniques
A wide array of statistical techniques are available for use in HR forecasting. Prominent among these are regression analysis, ratio analysis, trend analysis, time series analysis, and stochastic analysis. Brief descriptions of three of these techniques are given in Exhibit 3.7.
The use of integrated workforce planning software, which can be combined with data from other organizational databases, makes it easier to use these statistical techniques than it was in the past. As we noted earlier, HR practitioners are also increasingly expected to back up their proposals and plans with hard data. The three techniques shown in Exhibit 3.7 have different strengths and weaknesses. Ratio analysis, which uses data from prior sales figures or other operational data to predict expected head count, is useful for integrating HR plans with other departments. However, this model cannot directly account for any changes in technology or skill sets that might change these ratios. The regression analysis technique can be used with historical predictors and can make more statistically precise estimates of future expectations by taking several factors into account simultaneously; however, collecting enough data to make good estimates can be time-consuming and requires judgment calls. Trend analysis is useful when organizations have data mostly on historical staffing levels with less detailed information on specific predictors. The decomposition of data into specific time periods of demand is also often used in health care and retail settings, where staffing levels vary greatly over the course of a year or even at different times of the day. Unfortunately, trend analysis does not directly take into account external factors that might change trends. In light of the problems with each of these methods, managers should use these statistical estimates only as a starting point and modify them as needed due to ongoing strategic and environmental changes.

Judgmental Techniques
Judgmental techniques represent human decision-making models that are used for forecasting HR requirements. Unlike statistical techniques, judgmental techniques use a decision maker who collects and weighs the information subjectively and then turns it into forecasts of HR requirements. The decision maker's forecasts may or may not agree very closely with those derived from statistical techniques.
Implementation of judgmental forecasting can proceed from either a top-down or bottom-up approach. In the former, top managers of the organization, organizational units, or functions rely on their knowledge of business and organizational plans to predict what future head counts will be. At times, these projections may,
EXHIBIT 3.7 Examples of Statistical Techniques to Forecast HR Requirements

(A) Ratio Analysis 1. Examine historical ratios involving workforce size. $ sales , No. of new customers
Example: = ? foTTE = ? 2. Assume ratio will be true in future. 3. Use ratio to predict future HR requirements.
, x$40,000 sales. Example: (a) —- — ,s Pas*ra^10 (b) Sales forecast is $4,000,000 (c) HR requirements = 100 FTEs (B) Regression Analysis 1. Statistically identify historical predictors of workforce size.
Example: FTEs = a + b, sales + b2 new customers 2. Only use equations with predictors found to be statistically significant. 3. Predict future HR requirements, using equation.
Example: (a) FTEs = 7 + .0004 sales + .02 new customers (b) Projected sales = $1,000,000 Projected new customers =300 (c) HR requirements = 7 + 400 + 6 = 413 (C) Trend Analysis 1. Gather data on staffing levels over time and arrange in a spreadsheet with one column for employment levels and another column for time. 2. Predict trend in employee demand by fitting a line to trends in historical staffing levels over time (this can be done by using regression or graphical methods in most spreadsheet programs). 3. Calculate period demand index by dividing each period's demand by the average annual demand.
Example: January demand index = Avg. January FTE/Avg. annual FTE 4. Multiply the previous year's FTEs by the trend figure, then multiply this figure by the period's demand index.
Example: A retail store finds that the average number of employees over the past five years has been 142, 146, 150, 155, and 160. This represents a consistent 3% increase per year; to predict the next year's average demand, multiply 160 by 1.03 to show a 3% expected increase. Over this same time period, it averaged 150 FTEs per month, with an average of 200 FTEs in December. This means the December demand index is 200/150 = 1.33, so its estimate for next year's December FTE demand will be (160 x 1.03) x 1.3 = 219 FTEs.

in fact, be dictates rather than estimates, necessitated by strict adherence to the business plan. Such dictates are common in organizations undergoing significant change, such as restructuring, mergers, and cost-cutting actions.
In the bottom-up approach, lower-level managers make initial estimates for their unit (e.g., department, office, or plant) on the basis of what they have been told or presume are the business and organizational plans. These estimates are then consolidated and aggregated upward through successively higher levels of management. Then, top management establishes the HR requirements in terms of numbers.

Forecasting HR Availabilities
In Exhibit 3.6 head-count data are given for the current workforce and their availability as forecast in each job category/level. These forecast figures take into account movement into and out of each job category/level and exit from the organizational unit or the organization. Described below are three approaches for forecasting availabilities: manager judgment, Markov Analysis, and replacement and succession planning.

Manager Judgment
Individual managers may use their judgment to make availability forecasts for their work units. This is especially appropriate in smaller organizations or in ones that lack centralized workforce internal mobility data and statistical forecasting capabilities. Continuing the example from Exhibit 3.6, assume the manager is asked to make an availability forecast for the entry sales job category A1. The template to follow for making the forecast and the results of the forecast are shown in Exhibit 3.8. To the current staffing level in Al (100) is added likely inflows to Al (10), and then likely outflows from Al (37) are subtracted to yield the forecasted staffing

EXHIBIT 3.8 Manager Forecast of Future HR Availabilities

lob Category/Level: Sales (A1)


Promotion=0 Transfer=9 Demotion=1
Promotion = 10 Transfer=15 Demotion=0 Exit=12
Time 2
Forecasted Staffing Avail. = 73

Note: Promotion is A1 to A2, A1 to B2, B1 to B2, or B1 to A2; transfer is Al to B1, A2 to B2> B1 to Al 1 B2 to A2; demotion is A2 to A1, A2 to B1, B2 to B1, or B2 to Al.

availability (73). Determining t lie inflow unci outflow numbers requires judgmental estimates as to the numbers of promotions, transfers, demotions, and exits. As I shown at the bottom of Exhibit 3.8, promotions involve an upward change of job | level within or between job categories, transfers are lateral moves at the same job level across job categories, and demotions are downward changes of job level within or between job categories. Separate forecasts may be done for the other job category/levels (A2* Bl, and B2).
To provide reliable estimates, the manager must be very knowledgeable about both organizational business plans and individual employee plans or preferences for staying in their current job versus moving to another job. Knowledge of business plans will be helpful in judging the likely internal mobility opportunities for employees. Business expansion, for example, will likely mean expanding internal mobility opportunities. Knowledge of employee plans or preferences will help pinpoint which employees are likely to change jobs or leave the work unit or organization. The estimated staffing availability (n 73) in Exhibit 3.8 coincides closely with the availability estimate (n = 71) derived from forecasting based on Markov Analy- sis results, discussed below. This is intentional. Markov Analysis uses historical mobility data and probabilities to forecast future availabilities, while managers' judgment uses current knowledge of business and employees' plans to forecast employee movements person by person. Results from these two approaches to availability forecasts will not necessarily coincide, but they can be quite close if the manager is knowledgeable about past mobility patterns, employee mobility inten- tions, and mobility opportunities. ? |
A major problem with using manager judgment to forecast availabilities is that the manager may lack the necessary business plan and employee intention information to provide solid estimates, as opposed to casual guesstimates. In addition, if there are large numbers of employees and job category/levels in the work unit, the sheer complexity of the forecasting task may overwhelm the manager. Markov Analysis presents a way out of this dilemma, since it substitutes historical data about internal mobility and exit rates for the manager's judgment as a basis for making availability forecasts, and it simultaneously considers all types of possible employee movement in the forecasts.

Markov Analysis
Markov Analysis is used to predict availabilities on the basis of historical patterns of job stability and movement among employees. Consider again the four job category/levels (Al, A2, B K and B2) in the sales and customer service unit in Exhibit 3.6. Note that between any two time periods, the following possibilities exist for each employee in the internal labor market: 1. Job stability (remain in A1, A2, BI, or B2) 2. Promotion (move to a higher level: A1 to A2, A1 to B2, B1 to B2, or B1 to A2) 3. 1. Transfer (move at the same level: Al to B1, Bl to Al, A2 to B2, or B2 to A2) 2. Demotion (move to a lower level: A2 to Al, A2 to B1, B2 to B1, or B2 to Al) 3. Exit (move to another organizational unit or leave the organization)
These possibilities may be thought of in terms of flows and rates of flow or movement rates. Past flows and rates may be measured and then used to forecast the future availability of current employees, based on assumptions about the extent to which past rates will continue unchanged in the future. For example, if it is known that the historical promotion rate from Al to A2 is .10 (10% of Al employees are promoted to A2), we might predict that Al will experience a 10% loss of employees due to promotion to A2 over the relevant time period. To conduct Markov Analysis we must know all of the job stability, promotion, transfer, demotion, and exit rates for an internal labor market before we can forecast future availabilities.
The elements of Markov Analysis are shown in Exhibit 3.9 for the organizational unit originally presented in Exhibit 3.6. Refer first to part A of Exhibit 3.9, where movement rates between two time periods (T and T+l) are calculated for four job category/level combinations. This is accomplished as follows. For each job category/level, take the number of employees who were in it at T, and use that number as the denominator for calculating job stability and movement rates. Next, for each of those employees, determine which job category/level they were employed in at T+1. Then, sum up the number of employees in each job category/level at

EXHIBIT 3.9 Use of Markov Analysis to Forecast Availabilities

Transition Probability Matrix Job Category and Level | A1 | A2 | T + 1 B1 | B2 | Exit | Al | .60 | .10 | .20 | .00 | .10 | A2 | .05 | .60 | .00 | .00 | .35 | Bl | .05 | .00 | .60 | .05 | .30 | B2 | .00 | .00 | .00 | .80 | .20 |

B. Forecast of Availabilities
Current Workforce A1 100 A2 20 B1 200 B2 15

60 | 10 | 20 | 0 | 1 | 12 | 0 | 0 | 10 | 0 | 120 | 10 | 0 | 0 | 0 | 12 | 71 | 22 | 140 | 22 |

T+l, and use these as the numerators for calculating stability and movement rates. Finally, divide each numerator separately by the denominator. The result is the stability and movement rates expressed as proportions, also known as transition probabilities. The rates for any row (job category/level) must add up to 1.0.
For example, consider job category /level Al. Assume that at time T in the past, Al had 400 people. Further assume that at T+l, 240 of these employees were still in Al, 40 had been promoted to A2, 80 had been transferred to Bl, 0 had been promoted to B2, and 40 had exited the organizational unit or the organization. The resulting transition probabilities, shown in the row for Al, are .60, .10, .20, .00, and .10. Note that these rates sum to 1.00.
By referring to these figures, and the remainder of the transition probabilities in the matrix, an organization can begin to understand the workings of the unit's internal labor market. For example, it becomes clear that 60%-80% of employees experienced job stability and that exit rates varied considerably, ranging from 10% to 35%. Promotions occurred only within job categories (Al to A2, Bl to B2), not between job categories (Al to B2, Bl to A2). Transfers were confined to the lower of the two levels (Al to Bl, Bl to Al). Only occasionally did demotions occur, and only within a job category (A2 to Al). Presumably, these stability and movement rates reflect specific staffing policies and procedures that were in place between T and T+l.
With these historical transitional probabilities, it becomes possible to forecast the future availability of the current workforce over the same time interval, T and T+l, assuming that the historical rates will be repeated over the time interval and that staffing policies and procedures will not change. Refer now to part B of Exhibit 3.9. To forecast availabilities, simply take the current workforce column and multiply it by the transition probability matrix shown in part A. The resulting availability figures (note these are the same as those shown in Exhibit 3.6) appear at the bottom of the columns: Al = 71, A2 = 22, Bl = 140, and B2 = 22. The remainder of the current workforce (80) is forecast to exit and will not be available at T+l.

Limitations of Markov Analysis. | Markov Analysis is an extremely useful way to capture the underlying workings of an internal labor market and then use the results to forecast future HR availabilities. It is, however, subject to some limitations that must be kept in mind.18
The first and most fundamental limitation is that of sample size, or the number of current workforce employees in each job category/level. As a rule, it is desirable to have 20 or more employees in each job category/level. Since this number serves as the denominator in the calculation of transition probabilities, with small sample sizes there can be substantial differences in the values of transition probabilities, even though the numerators used in their calculation are not that different (e.g., 2/10 § .20 and 4/10 = .40). Thus, transition probabilities based on small samples yield unstable estimates of future availabilities.
A second limitation of Markov Analysis is that it does not detect multiple moves by employees between T and T+l; it only classifies employees and counts their movement according to their beginning (T) and ending (T+l) job category /level, ignoring any intermittent moves. To minimize the number of undetected multiple moves, therefore, it is necessary to keep the time interval relatively short, probably no more than two years.
A third limitation pertains to the job category/level combinations created to serve as the unit of analysis. These must be meaningful to the organization for the HRP purposes of both forecasting and action planning. Thus, extremely broad categories (e.g., managers or clericals) and categories without any level designations should be avoided. Note that this recommendation may conflict somewhat with HRP for affirmative action purposes, as discussed later.
Finally, the transition probabilities reflect only gross, average employee movement and not the underlying causes of the movement. Stated differently, all employees in a job category/level are assumed to have an equal probability of movement. This is unrealistic because organizations take many factors into account (e.g., seniority, performance appraisal results, and KSAOs) when making movement decisions about employees. Because of these factors, the probabilities of movement may vary among specific employees.

Replacement and Succession Planning
Replacement and succession planning focus on identifying individual employees who will be considered for promotion, along with thorough assessment of their current capabilities and deficiencies, coupled with training and development plans to erase any deficiencies. The focus is thus on both the quantity and the quality of HR availability. Through replacement and succession planning the organization constructs internal talent pipelines that ensure steady and known flows of qualified employees to higher levels of responsibility and impact. Replacement planning precedes succession planning, and the organization may choose to stop at just replacement planning rather than proceeding into the more complex succession planning.19
Replacement and succession planning can occur at any and all levels of the organization. They are most widely used at the management level, starting with the chief executive officer and extending downward to the other officers or top managers. They can also be used throughout the entire management team, including the identification and preparation of individuals for promotion into the entry management level. They may also be used for linchpin positions—ones that are critical to organization effectiveness (such as senior scientists in the research and development function of a technology-driven organization) but not necessarily housed within the management structure.

Replacement Planning. Replacement planning focuses on identifying individual employees who will be considered for promotion and thoroughly assessing their current capabilities and deficiencies. Training and development plans to improve the fit between capabilities and requirements are also developed. The focus is thus on both the quantity and the quality of HR availability. The results of replacement planning are shown on a replacement chart, an example of which is shown in Exhibit 3.10. The chart is based on the previous sales-customer service unit in Exhibit 3.6. The focus is on replacement planning for sales managers (A2) from the ranks of sales associates (Al), as part of the organization's "grow your own," promotion-from-within HR strategy. The top part of the chart indicates the organization unit and jobs covered by replacement planning, as well as the minimum criteria for promotion eligibility. The next part shows the actual replacement chart information for the incumbent department manager (Woo) and the two eligible sales associates (Williams and Stemke) in the menswear department at the Clo-verdale store. The key data are length of service, overall performance rating, and the promotability rating. When the incumbent sales manager (Woo) is promoted to group sales manager, both sales associates will be in the promotion pool. Williams will likely get the position because of her "ready now" promotability rating. Given his relatively short length of service and readiness for promotion in less than one year, Stemke is probably considered a "star" or a "fast tracker" whom the organization will want to promote rapidly. Similar replacement charts could be developed for all departments in the store and for all hierarchical levels up to and including store manager. Replacement chart data could then be aggregated across stores to provide a corporate composite of talent availability.
The process of replacement planning has been greatly accelerated by human resources information systems (HRISs). Many HRISs make it possible to keep data on KSAOs for each employee based on job history, training, and outside education. Software also allows organizations to create lists of employees who are ready to move into specific positions, and to assess potential risks that managers or leaders will leave the organization. The ability to keep track of employees across the organization by standardized inventories of skill sets means that staffing managers will be able to compare a variety of individuals for new job assignments quickly and consistently. A large database of candidates also makes it possible to seek out passive internal job candidates who aren't actively looking for job changes but might be willing to take new positions if offered. Many organizations that use integrated database systems that track candidates across a variety of locations report that they are able to consider a larger pool of candidates than they would with a paper-based system. Some HRISs automatically alert HR when key positions become open, and thus the process of finding a replacement can get under way quickly. The development of comprehensive replacement planning software is typically quite expensive, with costs reaching hundreds of thousands of dollars. The software is probably most useful for large organizations that are able to capitalize on the costs of a large system. However, smaller organizations may find it possible to create their own simpler databases of skills within the organization as a means of facilitating the internal replacement process.20

EXHIBIT 3.10 Replacement Chart Example
Organizational Unit: Merchandising—Soft Goods Replacement for: Department Sales Manager (A2)
Ready in < 1 yr.
Ready in 1-2 yrs.
Not promotable
Pipelines for Replacement: Department Sales (Al)—preferred; External Hire—last resort Minimum Eligibility Requirements: Two years' full-time sales experience; overall performance rates of "exceeds expectation"; promotability rating of "ready now" or "ready in < 1 yr."

Department: Menswear Store: Cloverdale | Incumbent Manager | Yearsin Job Overall Performance Rating | | | Seng Woo | 7 X Exceeds expectations | Meets expectations | Below expectations | Promote to | Promotability Rating | | |
Group Sales Manager X Ready now

| Replacement | Yearsin Job Overall Performance Rating | | | | Shantara Williams | 8 X Exceeds expectations | Meets expectations | Below expectations | | Promote to | Promotability Rating | | | | Sales Manager | X Ready now Ready in < 1 yr. | Ready in 1-2 yrs. | Not promotable |


Years in Job

Overall Performance Rating

Lars Stemke

X Exceeds expectations

Meets expectations

Below expectations

Promote to

Promotability Rating

Sales Manager

Ready now X Ready in < 1 yr.

Ready in 1-2 yrs.

Not promotable

Succession Planning. Succession plans build on replacement plans and directly tie into leadership development. The intent is to ensure that candidates for promotion will have the specific KSAOs and general competencies required for success in the new job. The key to succession planning is assessing each promotable employee for KSAO or competency gaps, and where there are gaps, creating employee training and development plans that will close the gap. A survey conducted by the Society for Human Resource Management showed that over half of HR professionals indicated that their organization had implemented some form of succession planning.21
Continuing the example from replacement planning, Exhibit 3.11 shows a succession plan for the two promotable sales associates. The organization has developed a set of general leadership competencies for all managers, and for each management position (such as sales manager) it indicates which of those competencies are required for promotion, in addition to the minimum eligibility require-

EXHIBIT 3.11 Succession Plan Example

Organizational Unit: Merchandising-Soft Goods Department: Menswear Position to Be Filled: Sales Manager (A2) Leadership Competencies Required * Plan work unit activities * Budget preparation and monitoring * Performance management of sales associates * Eligible Promotability Competency Replacements Ratings Gaps

Development Plans

S. Williams Ready now Budget prep

Now completing in-house training course

L. Stemke

Ready in < 1 year

Plan work Shadowing sales manager

Budget prep Starting in-house training course

Perf. mgt. Serving as sales manager 10 hours per week

Taking course on performance management at university extension

ments. It is the focus on these competencies, and the development plans to instill them in promotion candidates lacking them, that differentiates replacement and succession planning.
It can be seen that Williams, who is "ready now," has no leadership competency gaps, with the possible exception of an in-house training course on budget preparation and monitoring, which she is currently completing. Stemke, while having "star" potential, must undertake development work. When he completes that work successfully, he will be promoted to sales manager as soon as possible. Alternatively, he might be placed in the organization's acceleration pool. This pool contains hotshots like Stemke from within the organization who are being groomed for management positions generally, and for rapid acceleration upward, rather than progressing through the normal promotion paths.
It should be noted that replacement and succession planning require managers' time and expertise to conduct, both of which the organization must be willing to provide to those managers. Replacement and succession planning software might be helpful in this regard. Moreover, there must be effective performance appraisal and training and development systems in place to support replacement and succession planning. For example, overall performance and promotability ratings, plus assessment of competency gaps and spelling out development plans, could occur annually as part of the performance appraisal process conducted by management. In addition to identifying the skills needed immediately, succession plans should also identify skills needed in the future. Finally, making promotability and development assessments requires managers to make tough and honest decisions. A study of successful succession management in several Fortune 500 organizations concluded that "succession management is possible only in an organizational culture that encourages candor and risk taking at the executive level. It depends on a willingness to differentiate individual performance and a corporate culture in which the truth is valued more than politeness."22
An example of successful succession planning is the system used by Well-point Health Network in California, which has 16,500 employees and 50 million members throughout many subsidiaries such as Blue Cross of California.23 The plan covers 600 managers in the top five levels of management, which Wellpoint thought was necessary to handle the multiple job shifts set in motion by filling a high-level vacancy. An HRP system was used to catalog detailed information about managers—including performance and promotability ratings, major accomplishments, and career goals. The system allows for organization-wide identification of eligible candidates for each management position. A unique feature is "challenge sessions," in which managers review one another's staffs, looking for hidden candidates who might have been overlooked by the immediate supervisor. Succession planning and performance appraisal are combined into one annual process where the manager rates the person's performance, core competencies, and promotability. These data are placed in an online (secure website) resume, along with other KSAO information such as education, language skills, and past experiences.

Special training programs are undertaken when serious competency gaps are discovered. Use of the succession planning system has had good results. When a very senior manager left the organization, filling his position and the four other vacancies that occurred through musical chairs was done internally. Wellpoint was able to fill all the positions quickly and saved about $1 million on what an executive search firm would have charged to conduct external searches. More generally, the system allowed for 86% of management vacancies to be filled from within, saved $21 million in external recruitment and new hire training, and reduced the time to fill management vacancies from 60 to 35 days.

Reconciliation and Gaps
The reconciliation and gap determination process is best examined by means of an example. Exhibit 3.12 presents intact the example in Exhibit 3.6. Attention is now directed to the reconciliation and gaps column. It represents the results of bringing together requirements and availability forecasts with the results of external and internal environmental scanning. Gap figures must be decided on and entered into the column, and the likely reasons for the gaps need to be identified.
Let's first consider job category/level Al. A relatively large shortage is projected due to a mild expansion in requirements coupled with a substantial drop in availabilities. This drop is not due to an excessive exit rate but to losses through promotions and job transfers (refer back to the availability forecast in Exhibit 3.9).
For A2, decreased requirements coupled with increased availabilities lead to a projected surplus. Clearly, changes in current staffing policies and procedures will have to be made to stem the availability tide, such as a slowdown in the promotion rate into A2 from A1, or to accelerate the exit rate, such as through an early retirement program.
Turning to Bl, note that a huge shortage is forecast. This is due to a major surge in requirements and a substantial reduction in availabilities. To meet the shortage, the organization could increase the transfer of employees from Al. While this would worsen the already-projected shortage in A1, it might be cost effective and would beef up the external staffing for Al to cover the exacerbated shortage. Alternately, a massive external staffing program could be developed and undertaken for Bl alone. Or, a combination of internal transfers and external staffing for both Al and Bl could be attempted. To the extent that external staffing becomes a candidate for consideration, this will naturally spill over into other HR activities, such as establishing starting-pay levels for Al and Bl. Finally, a very different strategy would be to develop and implement a major retention program for employees in customer service.
For B2 there is a small projected shortage. This gap is so small, however, that for all practical purposes it can be ignored. The HRP process is too imprecise to warrant concern over such small gap figures.

Organizational Unit: Sales and Customer Service | | | Forecast for Workforce— | | | Job Category | Current | One Year | Reconciliation | | and Level | Workforce | Requirements | Availabilities | and Gaps | Action Planning | A1 (Sales) | 100 | 110 | 71 | - 39 (shortage) | Recruitment | | | | | | Selection | A2 (Sales manager) | 20 | 15 | 22 | + 7 (surplus) | Employment | | | | | | Retention | B1 (Customer service | 200 | 250 | 140 | -110 (shortage) | Compensation | representative) | | | | | Training and | B2 (Customer service | 15 | 25 | 22 | — 3 (shortage) | development | manager) | | | | | |
EXHIBIT 3.12 Operational Format and Example for Human Resource Planning

In short, the reconciliation and gap phase of HRP involves coming to grips with projected gaps and the likely reasons for them. Quite naturally, thoughts about future implications begin to creep into the process. Even in the simple example shown, it can be seen that considerable action will have to be contemplated and undertaken to respond to the forecasting results for the organizational unit. That will involve mixtures of external and internal staffing, with compensation as another likely HR ingredient. Through action planning these possibilities become real,


After the process of staffing planning is complete, it is time to move toward the development of specific plans for staffing. This is a vital phase of the planning process, in which staffing objectives are developed and alternative staffing activities are generated. The objectives are the targets the organization establishes to determine how many employees will be needed and in which job categories. The activities are the specific methods, including recruiting and selection strategies that will be used to meet these objectives. We devote special attention in this section to one of the most critical decisions made during staffing planning: Should the organization use a core workforce or a flexible workforce, or should parts of the workforce be outsourced?

Staffing Planning Process
Staffing Objectives
Staffing objectives are derived from identified gaps between requirements and availabilities. Thus, they involve objectives responding to both shortages and surpluses. They may require the establishment of quantitative and qualitative targets.
Quantitative targets should be expressed in head count or FTE form for each job category/level and will be very close in magnitude to the identified gaps. Indeed, to the extent that the organization believes in the gaps as forecast, the objectives will be identical to the gap figures. A forecast shortage of 39 employees in Al, for example, should be transformed into a staffing objective of 39 accessions (or something close to it) to be achieved by the end of the forecasting time interval. Exhibit 3.13 illustrates these points. For each cell, enter a positive number for head-count additions and a negative number for head-count subtractions.
Qualitative staffing objectives refer to the qualities of people in KSAO-type terms. For external staffing objectives, these may be stated in terms of averages, such as average education level for new hires and average scores on ability tests. Internal staffing objectives of a qualitative nature may also be established. These may reflect desired KSAOs in terms of seniority, performance appraisal record over a period of years, types of on- and off-the-job training, and so forth.

Job | | | | | | | Category | | | Objectives | | | | Hi 1 KMLevel | Gap | New Hires | Promotions Transfers | Demotions | Exits | Total | A1 | -39 | 52 | -6 -3 | 0 | -4 | +39 | A2 | + 7 | 0 | +2 -8 | 0 | -1 | -7 | B1 | -110 | +140 | -5 -3 | -2 | -20 | +110 | B2 | -3 | +2 | +4 -1 | 0 | -2 | +3 |
EXHIBIT 3.13 Setting Numerical Staffing Objectives
Note: The objective is to close each gap exactly.
The results of replacement and succession planning, or something similar to that, will be very useful to have as well.

Generating Alternative Staffing Activities
With quantitative and, possibly, qualitative objectives established, it is necessary to begin identifying possible ways of achieving them. At the beginning stages of generating alternatives, it is wise to not prematurely close the door on any of them. Exhibit 3.14 provides an excellent list of the full range of options available for initial consideration in dealing with employee shortages and surpluses.
As shown in the exhibit, both short- and long-term options for shortages, involving a combination of staffing and workload management, are possible. Short-term options include utilizing current employees better (through more overtime, productivity increases, and buybacks of vacation and holidays), outsourcing work to other organizations (subcontracts, transfer work out), and acquiring additional employees on a short-term basis (temporary hires and assignments). Long-term options include staffing up with additional employees (recall former employees, transfer in employees from other work units, and add new permanent hires), enhancing skills (retrain), and pushing work on to other organizations (transfer work out).

Assessing and Choosing Alternatives
As should be apparent, a veritable smorgasbord of alternative staffing activities are available to address staffing gaps. Each of these alternatives needs to be assessed systematically to help decision makers choose from among them.
The goal of such assessment is to identify one or more preferred activities. A preferred activity offers the highest likelihood of attaining the staffing objective within the time limit established, at the least cost or tolerable cost, and with the

EXHIBIT 3.14 Staffing Alternatives to Deal With Employee Shortages and Surpluses

Long-term options

Short-term options

Permanent in-transfers i Increase overtime or part time
Increase subcontracts
Increase productivity
Buy back vacation or holidays

Temporary assignments i i

Transfer work out

Permanent out-transfers
Retirement incentives
Freeze hires and use attrition

Short-term options



Freeze hires and use attrition
Reduce overtime or part time

Transfer work in

Reduce work week
Temporary shutdown or layoff

Accumulate surplus

| Excused | | Temporary | | absences | | assignments |


fewest negative side effects. A wide variety of metrics are available to assess potential activities. First, a common set of assessment criteria (e.g., time for completion, cost, and probability of success) should be identified and agreed on. Second, each alternative should be assessed according to each of these criteria. In this way, all alternatives will receive equal treatment, and tendencies to jump at an initial alternative will be minimized.
All of these alternatives must be considered within the broader context of how the organization creates and structures its workforce. This involves the key strategic issue of core versus flexible workforce usage. Many of the staffing activity alternatives are more applicable to one type of workforce than another.

Core Workforce
A core workforce, defined as regular full-time and part-time employees of the organization, forms the bulk of most organizations' workforces. The key advantages of a core workforce are stability, continuity, and predictability. The organization can depend on its core workforce and build strategic plans based on it. Several other advantages also accrue to the organization from using a core workforce. The regularity of the employment relationship fosters a sense of commitment and shared purpose toward the organization's mission. Also, the organization maintains the legal right to control employees working in its behalf, in terms of both work process and expected results, rather than having to divide or share that right with organizations providing a flexible workforce, such as temporary employment agencies. Finally, the organization can directly control how it acquires its workforce and the qualifications of those it employs through the management of its own staffing systems. By doing so, the organization may build not only a highly qualified workforce but also one more likely to be retained, thus lessening pressure to continually restaff the organization.
Several disadvantages of a core workforce also exist. The implied permanence of the employment relationship "locks in" the organization's workforce, with a potential loss of staffing flexibility to rapidly increase, reduce, or redeploy its workforce in response to changing market conditions and project life cycles. Reducing the core workforce, in particular, can be very costly in terms of severance pay packages, low morale, and damage to the organization's reputation as a good employer. Additionally, the labor costs of the core workforce may be greater than that of the flexible workforce due to (1) higher wages, salaries, and benefits for the core workforce, and (2) the fixed nature of these labor costs, relative to the more variable costs associated with a flexible workforce. By using a core workforce, the organization incurs numerous legal obligations—particularly taxation and employment law compliance—that could be fully or partially avoided through use of flexible workforce providers, which would be the actual employer. Finally, use of a core workforce may deprive the organization of new technical and administrative knowledge that could be infused into it by use of flexible workers such as programmers and consultants.
Consideration of these numerous advantages and disadvantages needs to occur separately for various jobs and organizational units covered by the HR plan. In this way, usage of a core workforce proceeds along selective, strategic lines. Referring back to the original example in Exhibit 3.6, staffing planners should do a unique core workforce analysis for the sales and customer service unit, and within that unit, for both sales and customer service jobs at the entry and managerial levels. The analysis may result in a decision to use only full-time core workers for the managerial jobs, both full-time and part-time core workers for sales jobs, and a combination of full-time core customer service representatives augmented by both full-time and part-time temporary customer service representatives during peak sales periods. Once the job and work unit locations of the core workers have been determined, specific staffing planning for effective acquisition must occur. This involves planning of recruitment, selection, and employment activities; these topics will be covered in subsequent chapters. However, one overarching issue needs to be addressed very early on because of its pervasive implications for all of these staffing activities. The issue is staffing philosophy.

Staffing Philosophy
In conjunction with the staffing planning process, the organization's staffing philosophy should be reviewed. Weighed in conjunction with the organization's staffing strategies, the results of this review help shape the direction and character of the specific staffing systems implemented. The review should focus on the following issues: internal versus external staffing, equal employment opportunity and affirmative action (EEO/AA) practices, and applicant reactions.
The relative importance to the organization of external or internal staffing is a critical matter because it directly shapes the nature of the staffing system, as well as sends signals to applicants and employees alike about the organization as an employer. Exhibit 3.15 highlights the advantages and disadvantages of external and internal staffing. Clearly there are trade-offs to consider in deciding the optimal internal-external staffing mix. The point regarding time to reach full productivity warrants special comment. Any new hire, either internal or external, will require time to learn the new job and reach a full productivity level. It is suggested that internal new hires have the advantage here. This reflects an assumption that internal new hires require relatively little orientation time and may have received special training and development to prepare them for the new job. This specific advantage for internal new hires, however, needs to be weighed in tandem with the other advantages and disadvantages of each type of new hire.
In terms of EEO/AA, the organization must be sure to consider or develop a sense of importance attached to being an EEO/AA-conscious employer and the commitment it is willing to make in incorporating EEO/AA elements into all

EXHIBIT 3.15 Staffing Philosophy: Internal Versus External Staffing



• Positive employee reactions to promotion from within | • No new KSAOs into the organization | • Quick method to identify job applicants | • May perpetuate current underrepresentation of minorities and women | • Less expensive | • Small labor market to recruit from | • Less time required to reach full productivity | • Employees may require more training time | • Brings in employees with new KSAOs | • Negative reaction by internal applicants | • Larger number of minorities and women to draw from | • Time-consuming to identify applicants | • Large labor market to draw from | • Expensive to search external labor market | • Employees may require less training time | • More time required to reach full productivity |

phases of the staffing system. Attitudes toward EEO/AA can range all the way from outright hostility and disregard to benign neglect to aggressive commitment and support. As should be obvious, the stance that the organization adopts will have major effects on its operational staffing system, as well as on job applicants and employees.
As a final point about staffing philosophy, planners must continue to bear in mind that staffing is an interaction involving both the organization and job

applicants as participants. Just as organizations recruit and select applicants, so, too, do applicants recruit and select organizations (and job offers). Through their job search strategies and activities, applicants exert major influence on their own staffing destinies. Once the applicant opts into the organization's staffing process, he or she is confronted with numerous decisions about whether to continue on or withdraw from further consideration. This process of self-selection is inherent to any staffing system. During staffing planning, those within the organization must constantly consider how the applicant will react to the staffing system and its components, and whether they want to encourage or discourage applicant self-selection.

Flexible Workforce
The two major components of the flexible workforce are temporary employees provided by a staffing firm and independent contractors. Planning for usage of the flexible workforce must occur in tandem with core workforce planning; hence, it should begin with a review of the advantages and disadvantages of a flexible workforce.24 The key advantage is staffing flexibility. The flexible workforce may be used for adjusting staffing levels quickly in response to changing technological or consumer demand conditions and to ebbs and flows of orders for products and services. Other flexibility advantages are the ability to quickly staff new areas or projects and the ability to fill in for core workers absent due to illness, vacations, and holidays. Relative to the core workforce, the flexible workforce may also present labor cost advantages in the form of lower pay and benefits, more variable labor costs, and reduced training costs. It should be noted, however, that the temporary workforce provider shoulders many of these costs and simply passes them on to the organization through the fees it charges for its services. Another advantage is possibly being relieved of many tax and employment law obligations, since flexible workers are often not considered employees of the organization. For temporary employees, however, the organization may be considered a coemployer subject to some legal obligations, especially pertaining to EEO. An emerging advantage is that the flexible workforce, especially in the professional and technical ranks, may be an important source of new knowledge about organizational best practices and new skills not present in the core workforce, especially "hot skills" in high market demand. In a related vein, organizations use temporary or interim top executives to fill in until a permanent hire is found and on board, to spur change, and to launch special projects requiring their expertise.25 Finally, usage of a flexible workforce relieves the organization of the need to design and manage its own staffing systems, since this is done by the flexible workforce provider. An added advantage here is that the organization might use flexible workers on a tryout basis, much like a probationary period, and then hire into its core workforce those who turn out to be a solid person/job match. Many temporary workers are "temp-to-perm," meaning that the organization will hire them permanently if they perform successfully

in the temporary role. Such an arrangement is usually negotiated up front with the staffing services company.
These numerous advantages must be weighed against several potential disadvantages. Most important is the legal loss of control over flexible workers because they are not employees of the organization. Thus, although the organization has great flexibility in initial job assignments for flexible workers, it is very limited in the amount of supervision and performance management it can conduct for them. Exacerbating the situation is that frictions between core and flexible workers may also arise. Core workers, for example, may feel that flexible workers lack knowledge and experience, are just "putting in time," receive the easy job assignments, and do not act like committed team players. Also, flexible workers may lack familiarity with equipment, policies, procedures, and important customers; such deficiencies may be compounded by a lack of training in specific job requirements. Finally, it should be remembered that the quality of the flexible workforce will depend heavily on the quality of the staffing and training systems used by the provider of the flexible workers. The organization may end up with flexible but poorly qualified workers.
If the review of advantages and disadvantages of flexible workers confirms the strategic choice to use them in staffing, plans must be developed for the organization units and jobs in which they will be used, and for how they will be acquired. Acquisition plans normally involve the use of staffing firms and independent contractors, both of which perform the traditional staffing activities for the organization. Hence, in contrast to the substantial and sustained staff planning that must occur for the core workforce, planning for the flexible workforce is primarily a matter of becoming knowledgeable about these potential sources and lining them up in advance of when they are actually needed.

Staffing Firms
Recall that staffing firms (also called temporary help agencies) are the legal employers of the workers being supplied, though matters of coemployment may arise. Hence, the staffing firm conducts recruitment, selection, training, compensation, performance appraisal, and retention activities for the flexible workers. The firm is also responsible for their on-site supervision and management, as well as all payrolling and the payment of legally required insurance premiums. For such services the firm charges the organization a general fee for its labor costs (wages and benefits) plus a markup percentage of labor costs (usually 40%-50%) to cover these services' costs plus provide a profit. There may be additional charges for specially provided services, such as extra testing or background checks, or skill training. Temp-to-perm workers may be hired away from the firm (with its permission and for a special fee) by the organization to become regular employees in the core workforce. For larger clients the firm may provide an on-site manager to help the organization plan its specific staffing needs, supervise and appraise the performance of the temporary workers, handle discipline and complaints, and facilitate firm-organization relations. With such additional staffing services, the firm functions increasingly like a staffing partner rather than just a staffing supplier.
Use of a staffing firm requires advance planning, rather than a panicky phone call to a firm at the moment of staffing need. In addition to becoming aware of firms that might be accessed, it is wise to become familiar with their characteristics and services. Shown in Exhibit 3.16 are descriptions of the various factors and issues to become knowledgeable about for any firm.
When the organization chooses a firm, both parties should enter into a formal written agreement. The agreement should cover such matters as specific services to be provided, costs, steps to ensure that the flexible workers are employees of the firm (such as having an on-site manager for them), and the process for terminating the firm-organization relationship. It is best to have legal counsel prepare/review the agreement.
The organization may decide to establish its own in-house staffing firm. When this is done, the employees of the firm may even be employees of the organization. Managers thus have readily available flexible workers to whom they can turn, without having to go through all the planning steps mentioned above.

Independent Contractors
An independent contractor (IC) provides specific task and project assistance to the organization, such as maintenance, bookkeeping, advertising, programming, and consulting. The IC can be a single individual (self-employed, freelancer) or an employer with its own employees. Neither the IC nor its employees are intended to be employees of the organization utilizing the ICs services, and care should be taken to ensure that the IC is not treated as an employee (see Chapter 2).26
As with staffing firms, the organization must take the initiative to identify and check out ICs for possible use in advance of when they are actually needed. It is desirable to solicit and examine references from past or current clients of the IC. Also, as much as possible the organization should seek to determine how the IC staffs, trains, and compensates its employees. This could occur during a preliminary get-together meeting with the IC. In these ways, the organization will have cultivated and screened ICs prior to when they are actually needed.
It is recommended that the IC and the organization prepare and enter into a written agreement between them. In general, the agreement should clarify the nature and scope of the project and contain language that reinforces the intent to have the IC function as such, rather than as an employee. For example, the agreement should refer to the parties as "firm" and "contractor," describe the specific work to be completed, specify that payment will be for completion of the project (rather than time worked), make the IC responsible for providing all equipment and supplies, exclude the IC from any of the organization's benefits, and ensure that the IC is responsible for paying all legally required taxes. Preparation of such an agreement might require the assistance of legal counsel.
EXHIBIT 3.16 Factors to Consider When Choosing a Staffing Firm

Agency and Its Reputation

Types of Workers Provided
Planning and Lead Time Services Provided Recruitment Selection Training Wages and Benefits Orientation

Client Satisfaction

Worker Effectiveness Punctuality and Attendance

Job Performance Retention

Cost Markup

For Special Services

How long in business; location; references from clients available.
What occupation and KSAO levels; how many available. Does agency help client plan staffing levels and needs; how quickly can workers be provided.

What methods are used; how targeted and truthful is recruitment process.
What selection techniques are used to assess KSAOs. What types of training, if any, are provided before workers are placed with client.
How are wages determined; what benefits are provided. How does the agency prepare workers for assignment with client; does agency have an employee handbook for its workers.
How does agency supervise its workers on site of client; does agency provide on-site manager. Does agency allow client to hire its temporary workers as permanent employees.
How does agency attempt to gauge client satisfaction with services, workers, costs.

Does the agency monitor these; what is its record with previous clients.
Is it evaluated; how are the results used.
How long do workers remain on an assignment voluntarily; how are workers discharged by the agency.

What is the percentage over base wage charged to client (often it is 50% to cover benefits, overhead, profit margin). What services cost extra beyond the markup (e.g., temp-to-perm), and what are those costs.

Outsourcing of work functions can be defined as the transfer of a business process to an external organization. This is a more drastic step than simply using ICs or temporary employees. The primary difference is that when processes are outsourced, the organization expects to receive a completely finished product from

the external source. This means the organization does not hire, direct, or control the way in which work is performed; rather, it only receives the end result of the work. Within the HR department, it has become the norm for organizations to completely outsource payroll tasks, meaning that data from the organization are sent to a third-party vendor that will assess taxes and withholdings and take care of either directly depositing or sending out paychecks for employees.27
Organizations outsource for a variety of reasons. An obvious reason for outsourcing of manufacturing and routine information-processing tasks is the availability of less expensive labor on the global market. Often, specialized vendors can achieve economies of scale for routine tasks that are performed across a variety of organizations. Organizations will also outsource functions that have highly cyclical demand so that they do not have to make major capital outlays and go through the cost of hiring and training permanent workers to perform tasks that may not be needed in the future. Sometimes organizations will outsource functions that require specific expertise that cannot be economically generated in-house. Smaller organizations that require legal services, for example, often choose to hire an external law firm rather than establishing their own pool of legal specialists. As we have noted, many organizations also outsource routine business functions, such as having payroll or benefits administration tasks completed by third-party vendors.
One variant of outsourcing is termed "offshoring," which means that products or services are provided by an external source outside the country where the organization's core operations take place.28 The outsourcing of manufacturing to lower-wage countries has a long history, and this practice is likely to continue unabated. For example, in the computer industry it is common for large companies to have many subcomponent electronic parts manufactured by third-party vendors overseas, with final assembly of products performed domestically. Many companies have also outsourced routine computer programming and telephone help services to third-party providers in India because of the availability of a highly skilled labor force that typically draws only a fraction of the wages paid in North America. Offshoring is no longer limited to just blue- and pink-collar jobs. There has been a dramatic increase in offshoring white-collar technical and professional work in the initial years of the twenty-first century, fueled by improvements in global education, an increasingly positive climate for business in China and India, and increased demand for products and services in multinational organizations.
The decision to outsource is likely to be very controversial.29 Outsourcing is usually done for activities that have low added value for the organization. Normal transactional or procedural work that is easily replicated is likely to be outsourced. High-value-added operations that are core to the organization's business strategy almost certainly should not be outsourced. Although most managers are certainly aware that it is unwise to outsource work that is fundamental to a business's core operations, there are still many cases where organizations have discovered, too late, that they have outsourced work that should have been done internally. Additionally, offshoring has been the focus of media and political scrutiny. Extremely low wages and dangerous working conditions provided by external partners in foreign countries have created a backlash against certain companies that have offshored manufacturing jobs. Negative press about poor working conditions in overseas "sweatshops" has been especially prominent in the clothing industry. The import of children's toys tainted with lead made by outsourced manufacturing labor in overseas factories has been a major financial and media debacle for several American toy makers. When outsourcing, an organization needs to make certain that it is not losing too much control over its major work processes. Just because a business process has been outsourced does not mean that the organization has lost the responsibility (and this sometimes includes legal liability) for the actions of external partners.


Diversity programs arise out of a recognition that the labor force is becoming more demographically and culturally diverse. Diversity planning in staffing requires developing a strategy to recruit and select a diverse group of employees. Another major focus of diversity programs is the assimilation and adaptation of a diverse workforce.
To foster workforce diversity and to help strengthen the diversity-organizational effectiveness link, organizations have designed and implemented a wide variety of diversity initiatives and programs. Many of these initiatives involve staffing, as a diverse workforce must be actively identified, acquired, deployed, and retained. Most organizations supplement the staffing component of their diversity initiatives with many other programs, including diversity training for managers and employees to heighten awareness and acceptance of diversity, mentoring relationships, work/life balance actions such as flexible work schedules, team building, and special career- and credential-building job assignments.

Demography of the American Workforce
In part, organizations need to take diversity into account because the workforce has become more diverse. There has been a massive shift in the makeup of the American workforce over the past 30 years.30 Once excluded from large portions of the workforce, women now make up half of the labor force, along with making up a majority of university graduates. There has also been a dramatic increase in the ethnic and racial diversity of the workforce. Immigration into the United States has brought large numbers of Latinos and Asians, and the progress of civil rights legislation has removed previous barriers to employment faced by African Americans. Legislation and technology have combined to make accommodations that allow the entry of individuals with disabilities into the workforce more feasible. Finally, the age diversity of the workforce has increased over time, as greater numbers of individuals continue working into their sixties and seventies.
These shifts in the makeup of the workforce have permanently altered the requirements for successful HR management. Surveys conducted by the Society for Human Resource Management suggest that managers are especially concerned about the loss of skills due to the retirement of baby boomers, increases in medical expenses that arise as the workforce ages, and employee elder-care responsibilities.31 A host of other issues have been identified as arising from demographic changes, including providing work-life benefits for dual-career couples and developing multilingual training materials for workers who primarily speak a language other than English.

Business Case for Diversity
There is a strong impetus for effectively managing a diverse workforce. In fact, many argue that above and beyond the ethical need to treat all employees fairly and with respect, there is a financial imperative to manage diversity effectively.32 As we noted in the introductory chapter, there are two ways organizations can address issues related to diversity. In passive diversity planning, the organization reviews all policies and practices to ensure there is no discrimination on the basis of race, religion, national origin, gender, disability status, or age. In active diversity planning, the organization goes a step further by encouraging underrepresented minorities to apply for positions, actively recruiting from a variety of sources that are likely to be seen by underrepresented groups, and providing additional training and mentoring to encourage the advancement of underrepresented groups.
There are certain advantages to an active diversity management strategy. Specific advantages suggested by diversity advocates include expanded talent pools associated with recruitment from among all demographic groups, a diverse workforce that better understands the needs of a diverse customer base, diversity enhancing the creativity and problem-solving effectiveness of work teams, and diversity programs boosting job satisfaction among underrepresented groups, thus reducing costly absenteeism and turnover. At the same time, there are costs associated with these active diversity efforts that must be considered, as additional recruiting, selection, and training programs do not come for free. Empirical evidence suggests that despite the conceptual advantages of having more diverse points of view in work groups, demographically diverse teams are not more effective than more homogenous teams. Active diversity efforts that are specifically directed to some groups of employees and not others may also unintentionally send a message to members of the demographic majority that they are less welcome in the organization. Therefore, an organization needs to carefully consider how to engage in active diversity planning and select the right mix of passive and active strategies to maximize organizational effectiveness.

Planning for Diversity
Whether an organization adopts an active or passive diversity strategy, there are several ways that workforce diversity should be taken into account in the staffing planning process. First and foremost, top management must state that diversity goals are important and will be measured.33 Clear communications regarding diversity strategies should be made, and updated frequently, to remind employees of the importance of nondiscrimination for the organization's mission.
Many recruiting activities can help enhance the diversity of the workforce. One such activity is to advertise positions in media sources that target a variety of demographic groups.34 Organizations that wish to increase the diversity of their workforce may also consider recruiting at colleges, universities, and other institutions that have large numbers of underrepresented minorities. These efforts can have a major impact on employee attitudes. Studies show that women and minorities prefer to work at companies that show a commitment to diversity in their recruiting efforts. Internally, organizational promotion efforts should target qualified members of underrepresented minority groups, possibly supplemented with mentoring programs to overcome gaps in skills.35
There are also techniques that can incorporate diversity into the selection process. Requirements that might lead to lower representation of traditionally under-represented groups should be considered carefully, and eliminated when they are not absolutely necessary for job performance. Additionally, efforts to incorporate objective standards for judging candidate qualifications and policies that encourage nondiscrimination have been shown to diminish the extent of discrimination in the hiring process.36
Unfortunately, evidence suggests that many organizations do not take demographic shifts in the workplace into account when developing staffing plans. Programs to help dual-career couples manage work and child-care arrangements are implemented in a rather scattered fashion, with some organizations doing little to recognize the needs of such families. Other organizations have failed to adequately address the needs of employees with disabilities, even though disability rights advocates note that most accommodations are relatively inexpensive and do not affect core job tasks. A survey of over 700 organizations found that 77% of companies had not analyzed projected retirement rates of their workforce or had done so to only a limited extent.37 Similarly, data show that about a third of employers report that they do not have enough programs for the recruitment and training of older workers.38
Research shows that diversity-oriented practices, including targeted recruitment, inclusion of women and African Americans on the top management team, work/ family accommodations, the creation of AAPs, and diversity councils, can increase the racial and gender diversity of the organization's entire managerial workforce.39 The effects of such practices on the composition of the nonmanagerial workforce are not well known, nor have the effects of these practices on organizational performance been documented.
It should be remembered that myriad staffing laws and regulations also apply to diversity initiatives, so the legal ramifications of any diversity-oriented policies and procedures should be considered.


The major legal issues in HR and staffing planning are A APs and diversity programs. AAPs originate from many sources—voluntary employer efforts, court-imposed remedies for discriminatory practices, conciliation or consent agreement, and requirements as a federal contractor. Regardless of the source, all AAPs seek to rectify the effects of past employment discrimination by increasing the representation of certain groups (minorities, women, and individuals with disabilities) in the organization's workforce. This is to be achieved through establishing and actively pursuing hiring and promotion goals for these groups. As described above, diversity programs are undertaken for competitive reasons, rather than as a legal response to discrimination. However, diversity programs may share components with AAPs.
This section describes the general content of AAPs, discusses the affirmative action requirements for federal contractors under AAP regulations, and provides some general indications as to the legality of AAPs and diversity programs.

Affirmative Action Plans
AAPs are organization-specific plans that, as noted above, have a legal origin and basis. They preceded diversity programs, which organizations typically undertake for strategic business reasons rather than legal ones. Often, however, the structure and content of AAPs and diversity programs are very similar. While AAPs are organization specific, they all share a common architecture composed of three major components—availability analysis of women and minorities, placement (hiring and promotion) goals derived from comparing availability with incumbency (percentages of women and minority employees), and action-oriented programs for meeting the placement goals. These components, and accompanying details, are spelled out in the federal regulations put forth and enforced by the Office of Federal Contract Compliance Programs (OFCCP).

Affirmative Action Programs Regulations
All but very small federal contractors must develop and implement AAPs according to the OFCCP's affirmative action regulations { Below are a summary of those regulations and a sample of an AAP for small employers from the OFCCP website. The contractor must develop a separate AAP for each of its establishments with more than 50 employees. With advance approval from the

OFCCP, the contractor may sidestep separate establishment plans by developing a functional plan that covers employees in discrete functional or business units, even though in different locations. All employees must be included in either AAP. The description that follows is for an establishment plan and is based on the EEO-1 form previously required. The currently required EEO-1 form is shown in Chapter 13. The OFCCP has not yet provided guidance on how to use the new EEO-1 form for AAP.

Organization Profile. An organization profile depicts the staffing pattern within an establishment. It provides a profile of the workforce at the establishment, and it assists in identifying units in which women or minorities are underrepresented. The profile may be done through either an organizational display or a workforce analysis. The latter requires a showing of job titles, while the former does not. Key elements in both approaches are a showing of organizational structure of lines of progression (promotion) among jobs or organization units, the total number of job incumbents, the total number of male and female incumbents, and the total number of male and female minority incumbents in each of the following groups: Blacks, Hispanics, Asians/Pacific Islanders, and American Indians/Alaskan Natives.

Job Croup Analysis. Jobs with similar content, wage rates, and opportunities (e.g., promotion, training) must be combined into job groups, and each group must include a list of job titles. Small establishments (fewer than 150 employees) may use as job groups the nine categories on the EEO-1 form: officials and managers, professionals, technicians, sales, office and clerical, craft workers (skilled), operatives (semiskilled), laborers (unskilled), and service workers. The percentage of minorities and the percentage of women (determined in the previous step) employed in each job group must be indicated.

Availability Determination. The availability of women and minorities must be determined separately for each job group. At a minimum, the following two factors should be considered when determining availability: 1. The percentage of minorities or women with requisite skills in the reasonable recruitment area 2. The percentage of minorities or women among those promotable, transferable, and training with the organization
Current census data, job service data, or other data should be consulted to determine availability. When there are multiple job titles in a job group, with different availability rates, a composite availability figure for the group must be calculated. This requires summing weighted availability estimates for the job titles.
Exhibit 3.17 shows an example of availability determination for a single job group (officials and managers) based on the EEO-1 form. Listed on the left are the two availability factors that must be considered. Shown next are the raw statistic

Job Croup: 1 | Raw Statistics Female Minority | Value Weight | Weighted Statistics Female Minority | Source of Statistics | Reason for Weighting | 1. Percentage of minorities or women with requisite skills in the reasonable recruitment area | 41.8% | 9.4% | 50.0% | 20.9% | 4.7% | 2000 Census DataThereasonable recruitment area for this job group is the St. Louis, MO-IL metropolitan statistical area (MSA). | 50% of placement into this job group is made from external hires. | | | | | | | | | 2. Percentage of minorities or women among those promotable, transferable, and trainable within the contractor's organization | 53.3% | 26.7% | 50.0% | 26.7% | 13.4% | The group of promotable employees in job group 2 | 50% of placement into this job group is made from internal promotions. | Totals: | 100% | 47.6% | 18.1% | <Final Factor | |
EXHIBIT 3.17 Determining Availability of Minorities and Women source: Sample Affirmative Action Program for Small Employers, 2004,

availability estimates for females and minorities (summed across the four minority groups) for each of the two availability factors (refer to the "Source of Statistics" column to see the sources of data for these estimates). Next, the value weights represent an estimate of the percentages of the total females and minorities available according to each availability factor (50% for each group). The weighted statistics represent the raw statistics multiplied by the value weight (e.g., 41.8% X .50 = 20.9%). A summing of the weighted statistics yields the total availability estimate percentages (47.6% for female, 18.1% for minority).

Comparison of Incumbency With Availability. For each job group, the percentages of women and minority incumbents must be compared with their availability. When the percentage employed is less than would reasonably be expected by the availability percentage, a placement goal must be established.
Exhibit 3.18 compares incumbency with availability for eight job groups, including the officials and managers group (job group 1). The comparisons are shown separately for females and minorities. Where incumbency is less than availability, it may be decided to establish a placement goal. In job group 1, it was concluded that the differences between availability and incumbency percentages for both females and minorities were sufficient to warrant placement goals (47.6% for females and 18.1% for minorities). Note that an incumbency percentage less than an availability percentage does not automatically trigger a placement goal (e.g., females in job group 5).
How does the organization decide whether to set a placement goal for females or minorities in a job group? The OFCCP permits some latitude. One possibility is to set a placement goal whenever incumbency is less than availability, on the theory that any differences between availability and incumbency represent unde-rutilization of females and minorities. A second possibility is based on the theory that some differences in percentages are due to chance, so some amount of tolerance of differences is permissible. The rule of thumb is 80% tolerance. This means that if the ratio of incumbency percentage to availability percentage is greater than 80%, no placement goal is needed. If the ratio is less than 80%, a placement goal must be set. The 80% rule was followed in Exhibit 3.18. Though the incumbency percentage for females was less than the availability percentage in both job groups 1 and 5, the difference was less than 80% in only job group 1, triggering a placement goal just for that group.

Placement Coals. If called for, an annual placement goal at least equal to the availability percentage for women or minorities must be established for the job group. Placement goals may not be rigid or inflexible quotas; quotas are expressly forbidden. Placement goals do not require hiring a person who lacks the qualifications to perform the job successfully, or hiring a less qualified person in preference to a more qualified one.

EXHIBIT 3.18 Determining Affirmative Action Goals: Comparing Incumbency With Availability and Annual Placement Goals

Female Incumbency
Female Availability
Establish Goal? Yes/No

If Yes, Goal for Females
Minority Incumbency
Minority Availability
Establish Goal? Yes/No

If Yes, Goal for Minorities

0.0% 47.6%













































note: The 80% rule of thumb was followed in declaring underutilization and establishing goals when the actual employment of minorities or females is less than 80% of their availability. If the female/minority incumbency percent (%) is less than the female/ minority availability percent {%) and the ratio of incumbency to availability is less than 80%, a placement goal should be included in the appropriate "If Yes" column. source: Sample Affirmative Action Program for Small Employers, 2004,

Designation of Responsibility. An official of the organization must be designated as responsible for the implementation of the A AP.

Identification of Problem Areas. The organization must evaluate the following: 1. Problems of minority or female utilization or distribution in each job group 2. Personnel activity (applicant flow, hires, terminations, and promotions) and other personnel actions for possible selection disparities 3. Compensation systems for possible gender-, race-, or ethnicity-based disparities 4. Selection, recruitment, referral, and other procedures to see if they result in disparities in employment or advancement of minorities or women

Action-Oriented Programs. Where problem areas have been identified, the organization must develop and execute action-oriented programs to correct problem areas and attain placement goals. Specific examples of these programs are shown in Exhibit 3.19.

Internal Audit and Reporting. An auditing system must be developed that periodically measures the effectiveness of the total AAP.

Legality of AAPs and Diversity Programs
AAPs have been controversial since their inception, and there have been many challenges to their legality. Questions of legality involve complex issues of constitutionality, statutory interpretations, differences in the structure of the AAPs being challenged in the courts, claims that affirmative action goals represent hiring quotas, and, very importantly, differences in the amount of weight actually being placed on race or gender in the ultimate selection decisions being made about job applicants.
Despite these problems, it is possible to provide several conclusions and recommendations regarding affirmative action. AAPs in general are legal in the eyes of the Supreme Court. However, to be acceptable, an AAP should be based on the following guidelines:40 1. The plan should have as its purpose the remedying of specific and identifiable effects of past discrimination. 2. There should be definite underutilization of women and/or minorities currently in the organization. 3. Regarding nonminority and male employees, the plan should not unsettle their legitimate expectations, not result in their discharge and replacement with minority or women employees, and not create an absolute bar to their promotion.
EXHIBIT3.19 Examples of Action-Oriented Programs for an AAP 1. Conducting annual analyses of job descriptions to ensure they accurately reflect job functions; 2. Reviewing job descriptions by department and job title using performance criteria; 3. Making job descriptions available to recruiting sources and to all members of management involved in the recruiting, screening, selection, and promotion processes; 4. Evaluating the total selection process to ensure freedom from bias through: a. Reviewing job applications and other pre-employment forms to ensure information requested is job related; b. Evaluating selection methods that may have a disparate impact to ensure that they are job related and consistent with business necessity; c. Training in EEO for management and supervisory staff; 5. Using techniques to improve recruitment and increase the flow of minority and female applicants: a. Include the phrase "Equal Opportunity/Affirmative Action Employer" in all printed employment advertisements; b. Place help-wanted advertisements, when appropriate, in local minority news media and women's interest media; c. Disseminate information on job opportunities to organizations representing minorities, women, and employment development agencies when job opportunities occur; d. Encourage all employees to refer qualified applicants; e. Actively recruit at secondary schools, junior colleges, and colleges and universities with predominantly minority or female enrollment; and f. Request employment agencies to refer qualified minorities and women. 6. Hiring a statistical consultant to perform a self-audit of compensation practices; and 7. Ensuring that all employees are given equal opportunity for promotion: a. Post promotional opportunities; b. Offer counseling to assist employees in identifying promotional opportunities, training and educational programs to enhance promotions and opportunities for job rotation or transfer; and c. Evaluate job requirements for promotion.

Source: Adapted from Sample Affirmative Action Program for Small Employers, 2010, 4. The plan should be temporary and should be eliminated once affirmative action goals have been achieved.41 4. All candidates for positions should be qualified for those positions. 5. The plan should include organizational enforcement mechanisms as well as a grievance procedure.
Court rulings on the constitutionality of federal and state government AAPs suggest that even more strict guidelines than these may be necessary. Insofar as these programs are concerned, racial preferences are subject to strict constitutional scrutiny. They may be used only when there is specific evidence of identified discrimination, when the remedy has been narrowly tailored to only the identified discrimination, when only those who have suffered discrimination may benefit from the remedy, and when other individuals will not carry an undue burden, such as job displacement, from the remedy. Lesser scrutiny standards may apply for gender preferences.42 Some states have even banned the use of AAPs by government employers, contractors, and educational institutions.43
Turning to diversity programs, the EEOC states the following about how they differ from AAPs, as well as their permissibility:
Diversity and affirmative action are related concepts, but the terms have different origins and legal connotations. Workforce diversity is a business management concept under which employers voluntarily promote an inclusive workplace. Employers that value diversity create a culture of respect for individual differences in order to "draw talent and ideas from all segments of the population" and thereby potentially gain a "competitive advantage in the increasingly global economy." Many employers have concluded that a diverse workforce makes a company stronger, more profitable, and a better place to work, and they implement diversity initiatives for competitive reasons rather than in response to discrimination, although such initiatives may also help to avoid discrimination.
Title VII permits diversity efforts designed to open up opportunities to everyone. For example, if an employer notices that African Americans are not applying for jobs in the numbers that would be expected given their availability in the labor force, the employer could adopt strategies to expand the applicant pool of qualified African Americans such as recruiting at schools with high African American enrollment. Similarly, an employer that is changing its hiring practices can take steps to ensure that the practice it selects minimizes the disparate impact on any racial group. For example, an employer that previously required new hires to have a college degree could change this requirement to allow applicants to have a college degree or two years of relevant experience in the field. A need for diversity efforts may be prompted by a change in the population's racial demographics, which could reveal an underrepresentation of certain racial groups in the work force in comparison to the current labor pool.44
EEO and Temporary Workers
The EEOC has provided guidance on coverage and responsibility requirements for temporary employment agencies (and other types of staffing firms) and their client organizations.45 When both the agency and the client exercise control over the temporary employee and both have the requisite number of employees, they are considered employers and jointly liable under the Civil Rights Act, Age Discrimination in Employment Act (ADEA), Americans With Disabilities Act (ADA), and the Equal Pay Act. It should be noted that these laws also apply to individuals placed with organizations through welfare-to-work programs. The agency is obligated to make referrals and job assignments in a nondiscriminating manner, and the client may not set discriminatory job referral and job assignment criteria. The client must treat the temporary employees in a nondiscriminatory manner; if the agency knows this is not happening, the agency must take any corrective actions within its control. There are substantial penalties for noncompliance (e.g., back pay, front pay, and compensatory damages) that may be obtained from either the agency or the client, or both. There is special guidance for ADA-related issues.


External forces shape the conduct and outcomes of HRP. The key forces and trends that emerge are economic conditions, labor markets, technology, and labor unions.
HRP is described as a process and set of activities undertaken to forecast future HR requirements and availabilities, resulting in the identification of likely employment gaps (shortages and surpluses). Action plans are then developed for addressing the gaps. Before HRP begins, initial decisions must be made about its comprehensiveness, planning time frame, job categories and levels to be included, how to "count heads," and the roles and responsibilities of line and staff (including HR) managers.
A variety of statistical and judgmental techniques may be used in forecasting. Those used in forecasting requirements are typically used in conjunction with business and organization planning. For forecasting availabilities, techniques must be used that take into account the movements of people into, within, and out of the organization, on a job-by-job basis. Here, manager judgment, Markov Analysis, and replacement and succession planning are suggested as particularly useful techniques.
Staffing planning is a form of action planning. It is shown to generally require setting staffing objectives, generating alternative staffing activities, and assessing and choosing from among those alternatives. A fundamental alternative involves the use of core or flexible workforces, as identified in staffing strategy. Plans must be developed for acquiring both types of workforces. Advantages and disadvantages of each type are provided; these should first be reviewed to reaffirm strategic choices about their use. Following that, planning can begin. For the core workforce, this first involves matters of staffing philosophy that will guide the planning of recruitment, selection, and employment activities. For the flexible workforce, the organization should establish early contact with the providers of the flexible workers (i.e., staffing firms and independent contractors). Organizational leaders should also consider the advantages and disadvantages of outsourcing some jobs at this point.
Changes in the demographic makeup of the workforce suggest that organizations need to take employee diversity into account in the planning process. Activities to address a diverse workforce include recruiting, selection, training, development, and retention.
AAPs are an extension and application of general HR and staffing planning. AAPs have several components. The Affirmative Action Programs Regulations, which apply to federal contractors, specify requirements for these components. The legality of AAPs has been clearly established, but the courts have fashioned limits to their content and scope. To clarify how EEO laws apply to temporary employees and agencies, the EEOC has issued specific guidance.

DISCUSSION QUESTIONS 1. What are ways that the organization can ensure that KSAO deficiencies do not occur in its workforce? 2. What are the types of experiences, especially staffing-related ones, an organization will be likely to have if it does not engage in HR and staffing planning? 3. Why are decisions about job categories and levels so critical to the conduct and results of HRP? 4. What are the advantages and disadvantages of doing succession planning for all levels of management, instead of just top management? 5. What is meant by reconciliation, and how can it be useful as an input to staffing planning? 6. What criteria would you suggest using for assessing the staffing alternatives shown in Exhibit 3.14? 7. What problems might an organization encounter in creating an AAP that it might not encounter in regular staffing planning?
ETHICAL ISSUES 1. Does an organization have any ethical responsibility to share midi al of a* employees the results of its forecasting erf HR requirements and avalabit ties? Does it have any ethical responsibility to not do this? 2. Identify examples of ethical dilemmas an organization might confront mfeg developing an AAR


Markov Analysis and Forecasting
The Doortodoor Sports Equipment Company sells sports clothing and equipment for amateur, light sport (running, tennis, walking, swimming, badminton, aod goifi enthusiasts. It is the only company in the nation that does this on a door-io-door basis, seeking to bypass the retail sporting goods store and sell directly to the customer. Its salespeople have sales kits that include both sample products and a full-line catalog they can use to show and discuss with customers- The sales motion is composed of full-time and part-time salespeople (level IX assistant safes managers (level 2), and regional sales managers (level 3).
The company has decided to study the internal movement patterns of peopk in the sales function, as well as to forecast their likely availabilities in future time periods. The results will be used to help identify staffing gaps (smphises and shortages) and to develop staffing strategy and plans for future growth-
To do this, the HR department first collected data for 2010 and 2011 to construct a transition probability matrix, as well as the number of employees for 2012 in each job category. It then wanted to use the matrix to forecast availabilities for 2013. The following data were gathered:

Transition Probabilities (2010-11) Current (2012) job Category Level SF SP ASM RSM Exit No. Employees Sales, Full-time (SF) 1 .50 .10 .05 .00 .35 500 Sales, Part-time (SP) 1 .05 .60 .10 .00 .25 150 Ass't. Sales Mgr. (ASM) 2 .05 .00 .80 .10 .05 50 Region. Sales Mgr. (RSM) 3 .00 .00 .00 .70 .30 30

Use these data to answer the following questions:
1. Describe the internal labor market of the company in terms of job stability (staying in same job), promotion paths and rates, transfer paths and rates, demotion paths and rates, and turnover (exit) rates. 2. Forecast the numbers available in each job category in 2013. 3. Indicate potential limitations to your forecasts.

Deciding Whether to Use Flexible Staffing
The Kaiser Manufacturing Company (KMC) has been in existence for over 50 years. Its main products are specialty implements for use in both the crop and dairy herd sides of the agricultural business. Products include special attachments for tractors, combines, discers, and so on, and add-on devices for milking and feeding equipment that enhance the performance and safety of the equipment.
KMC has a small corporate office plus four manufacturing plants (two in the Midwest and two in the South). It has a core workforce of 725 production workers, 30 clerical workers, 32 professional and engineering workers, and 41 managers. All employees are full time, and KMC has never used either part-time or temporary workers. It feels very strongly that its staffing strategy of using only a core workforce has paid big dividends over the years in attracting and retaining a committed and highly productive workforce.
Sales have been virtually flat at $175 million annually since 2008. At the same time, KMC has begun to experience more erratic placement of orders for its products, making sales less predictable. This appears to be a reflection of more turbulent weather patterns, large swings in interest rates, new entrants into the specialty markets, and general uncertainty about the future direction and growth of the agricultural industry. Increased unpredictability in sales has been accompanied by steadily rising labor costs. This is due to KMC's increasingly older workforce, as well as shortages of all types of workers (particularly production workers) in the immediate labor markets surrounding the plants.
Assume you are the HR manager responsible for staffing and training at KMC. You have just been contacted by a representative of the Flexible Staffing Services (FSS) Company, Mr. Tom Jacoby. Mr. Jacoby has proposed meeting with you and the president of KMC, Mr. Herman Kaiser, to talk about FSS and how it might be of service to KMC. You and Mr. Kaiser agree to meet with Mr. Jacoby. At that meeting, Mr. Jacoby makes a formal presentation to you in which he describes the services, operation, and fees of FSS and highlights the advantages of using a more flexible workforce. During that meeting, you learn the following from Mr. Jacoby.
FSS is a recent entrant into what is called the staffing industry. Its general purpose is to furnish qualified employees to companies (customers) on an as-needed basis, thus helping the customer implement a flexible staffing strategy. It furnishes employees in four major groups: production, clerical, technical, and professional/ managerial. Both full-time and part-time employees are available in each of these groups. Employees may be furnished to the customer on a strictly temporary basis ("temps") or on a "temp-to-perm" basis in which the employees convert from being temporary employees of FSS to being permanent employees of the customer after a 90-day probationary period.
For both the temp and temp-to*perm arrangements, FSS offers the following services. In each of the four employee groups it will recruit, select, and hire people to work for FSS* which will in turn lease them to the customer. FSS performs all recruitment, selection* and employment activities. It uses a standard selection sys* tern for all applicants* composed of an application blank, reference checks, drug testing, and a medical exam (given after making a job offer). It also offers customized selection plans in which the customer chooses from among a set of special skill tests, a personality test* an honesty test, and background investigations. Based on the standard and/or custom assessments, FSS refers to the customer what it views as the top candidates. FSS tries to furnish two people for every vacancy, and the customer chooses from between the two.
New hires at FSS receive a base wage that is similar to the market wage, as well as close to the wage of the customer's employees with whom they will be directly working. In addition* new hires receive a paid vacation (one week for every six months of employment* up to four weeks), health insurance (with a 25% employee co-pay), and optional participation in a 401(k) plan. FSS performs and pays for all payroll functions and deductions. It also pays the premiums for workers' compensation and unemployment compensation.
FSS charges the customer as follows. There is a standard fee per employee furnished of 1.55 X base wage X hours worked per week. The 1.55 is labeled "markup"; it covers all of FSS's costs (staffing, insurance, benefits, and administration) plus a profit margin. On top of the standard fee is an additional fee for customized selection services. This fee ranges from .50 to .90 x base wage X hours worked per week. Finally, there is a special one-time fee for temp-to-perm employees (a one-month pay finder's fee), payable after the employee has successfully completed the 90-day probationary period and transferred to being an employee of the customer.
Mr. Jacoby concludes his presentation by stressing three advantages of flexible staffing as provided by FSS. First, use of FSS employees on an as-needed basis will give KMC greater flexibility in its staffing to match fluctuating product demand, as well as movement from completely fixed labor costs to more variable labor costs. Second. FSS provides considerable administrative convenience, relieving KMC of most of the burden of recruitment, selection, and payrolling. Finally. KMC will experience considerable freedom from litigation (workers' comp. BEO* torts) since FSS and not KMC will be the employer.
After Mr. Jacoby's presentation, Mr. Kaiser tells you he is favorably impressed, but that the organization clearly needs to do some more thinking before it embarks on the path of flexible staffing and the use of FSS as its provider. He asks you to prepare a brief preliminary report including the following: 1. A summary of the possible advantages and disadvantages of flexible staffing 2. A summary of the advantages and disadvantages of using FSS as a service
3. A summary of the type of additional information you recommend gathering and using as part of the decision-making process


The planning chapter explained how organizations can integrate their strategic goals and administrative data to determine staffing needs. The planning case will illustrate how Tanglewood implements these activities.

The Situation
The process of planning involves a combination of forecasting labor needs, comparing these needs with labor availabilities, and determining where gaps exist. Data from Tanglewood's historical hiring practices are provided to assist you in developing these estimates. Beyond developing objectives for the number of individuals to be hired, you will need to consider the demographic composition of the workforce to ensure that the company's commitment to diversity is maintained. This is an extension of the affirmative action discussion in the textbook.

Your Tasks
You will first complete a forecast of HR availabilities. Due to the strong emphasis on corporate culture at Tanglewood, you will also consider whether it should move toward the use of a flexible workforce strategy. You will also estimate the representation of women and minorities in several job categories as part of affirmative action planning. The background information for this case, and your specific assignment, can be found at

ENDNOTES 1. K. Klemmer, "Job Openings and Hires Decline in 2008" Monthly Labor Review, May 2009, pp. 32-44. . ' 2. T. A. Lacey and B. Wright, "Occupational Employment Projections to 2018," Monthly Labor Review, May 2009, pp. 86-125. 1. Lacey and Wright, "Occupational Employment Projections to 2018." 3. A. Spitz-Oener, 'Technical Change, Job Tasks, and Rising Educational Demands: Looking Outside the Wage Structure," Journal of Labor Economics, 2006, 24, pp. 235-270. 4. Society for Human Resource Management, Critical Skills Needs and Resources for the Changing Workforce (Alexandria, VA: author, 2008). 5. M. Toossi, "Labor Force Projections to 2018: Older Workers Staying More Active," Monthly Labor Review, Nov. 2009, pp. 30-51; P. L. Rones, R. E. Ilg, and J. M. Garner, 'Trends in Hours of Work Since the Mid-1970s" Monthly Labor Review, Apr. 1997, pp. 3-14; J. Schramm. SHRM Workplace Forecast (Alexandria, VA: Society for Human Resource Management, 2008);
IS&J. Kiger, "With Baby Boomers Graying, Employers Are Urged to Act Now to Avoid Skills

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...SEGMENTATION – TARGETING – POSITIONING Fragmentation of mass markets  segments Consumers: variety of needs & preferences Marketers: offer variety of choices via multitude of marketing offerings Marketing segmentation: Needs  Action Linking market needs to an org’s marketing program Market needs  Segmentation/Targeting  MM A market segment: Group of consumers with homogenous profile & common needs  will similarly respond to a marketing program Segmentation – targeting – positioning 1 Using market-product grids: see how Reebok use different Reebok shoes to reach segments of customers with different needs Single product  multiple market segments e.g. TIME magazine  multiple geographical mkts multiple products  multiple segments firm offers variations of the basic product to high-end and low-end users e.g. GAP  with Old Navy, Banana Republic segments of one  mass customization built to order Segmentation – targeting – positioning 2 How to segment and target markets: 1. Group potential buyers into segments 2. Group products into categories 3. Develop a Market-Product Grid and estimate size of the market 4. Select target markets 5. Take marketing actions to reach target markets Segmentation – targeting – positioning 3 Criteria used in defining segments: 1. profitability 2. similarity of needs of potential buyers within a segment 3. differences of needs and buyers across segments 4. potential of a marketing action to reach a segment 5.......

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