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CHAPTER 5 PLANNING FOR AND RECRUITING HUMAN RESOURCES Chapter Summary This chapter explores how organizations carry out human resource planning. At the beginning, the chapter identifies the steps that go into developing and implementing a human resource plan. Each subsequent section of the chapter has a focus on recent trends and practices, such as downsizing and outsourcing, which are prevalent to human resource management. Throughout the remaining sections, an exploration into the recruiting process will be undertaken. At the end of the chapter, a discussion will be presented on the role of human resource recruiters. Learning Objectives After studying this chapter, the student should be able to: 1. Discuss how to plan for human resources needed to carry out the organization’s strategy. 2. Determine the labor demand for workers in various job categories. 3. Summarize the advantages and disadvantages of ways to eliminate a labor surplus and avoid a labor shortage. 4. Describe recruitment policies organizations use to make job vacancies more attractive. 5. List and compare sources of job applicants. 6. Describe the recruiter’s role in the recruitment process, including limits and opportunities. Extended Chapter Outline Note: Key terms are boldface and are listed in the “Chapter Vocabulary” section. I. Introduction 1. With a bigger workforce, an established company needs more creativity to avoid layoffs. 2. Trends and events that affect the economy also create opportunities and problems in obtaining human resources. 3. To prepare for and respond to these challenges, organizations engage in human resource planning, defined as identifying the numbers and types of employees the organization will require to meet its objectives.

II. The Process of Human Resource Planning 1. Organizations should carry out human resource planning so as to meet business objectives and gain an advantage over competitors. 2. Human resource planning compares the present state of the organization with its goals for the future, then identifies what changes it must make in its human resources to meet these goals. The changes may include downsizing, training existing employees in new skills, or hiring new employees. 3. Figure 5.1, Overview of the Human Resource Planning Process, identifies the stages of the human resource planning process. A. Forecasting 1. The first step in human resource planning is forecasting. This is defined as the attempts to determine the supply and demand for various types of human resources to predict areas within the organization where there will be labor shortages or surpluses. 2. Forecasting supply and demand can use statistical methods or judgment. Statistical methods capture historical trends in a company’s demand for labor. In situations where statistical methods are of little use, the organizations must rely on the subjective judgments of experts. 3. Forecasting the Demand for Labor: An organization forecasts demand for specific job categories or skill areas. There are several ways of making such forecasts: a. Trend analysis, which is constructing and applying statistical models that predict labor demand for the next year, given relatively objective statistics from the previous year. These statistics are called leading indicators, which are objective measures that accurately predict future labor demand. They may include measures of the economy, actions of competitors, changes in technology, and trends in the composition of the workforce. b. Statistical planning models are useful when there is a long, stable history that can be used to reliably detect relationships among variables. These models almost always have to be complemented with subjective judgments of experts.

4. Determining Labor Supply: Determining the internal labor supply calls for a detailed analysis of how many people are currently in various job categories or have specific skills within the organization. a. One type of statistical procedure that can be used for this purpose is the analysis of a transitional matrix. This is a chart that lists job categories held in one period and shows the proportion of employees in each of those job categories. b. Table 5.1 provides an example of a transitional matrix. Matrices such as the one indicated in Table 5.1 are extremely useful for charting historical trends in the company’s supply of labor. More importantly, if conditions remain somewhat constant, matrices can be used to plan for the future. c. Historical data may not always reliably indicate future trends. Thus, planners need to combine statistical forecasts of labor supply with expert judgments. d. Besides looking at labor supply within the organization, planners should examine trends in the external labor market. 5. Determining Labor Surplus or Shortage: Based on the forecasts for labor demand and supply, the planner can compare the figures to determine whether there will be a shortage or surplus of labor for each job category. Determining expected shortages and surpluses allows the organization to plan how to address these challenges. B. Goal Setting and Strategic Planning 1. The second step in human resource planning is goal setting and strategic planning. 2. The purpose of setting specific numerical goals is to focus attention on the problems and provide a basis for measuring the organization’s success in addressing labor shortages and surpluses. The goals should come directly from the analysis of labor supply and demand. 3. For each goal, the organization must choose one or more human resource strategies. 4. Table 5.2 shows major options for reducing an expected labor surplus and avoiding an expected labor shortage. The options differ widely in their expense, speed, and effectiveness.

5. Another consideration in choosing an HR strategy is whether the employees needed will contribute directly to the organization’s success. Organizations are most likely to benefit from hiring and retaining employees who provide a core competency, which is a set of knowledge and skills that make the organization superior to competitors and create value for customers. 6. Downsizing: This is the planned elimination of large numbers of personnel with the goal of enhancing the organization’s competitiveness. The primary reason organizations engage in downsizing is to promote future competitiveness. According to surveys, organizations do this by meeting four objectives: a. Reducing costs b. Replacing labor with technology c. Mergers and acquisitions d. Moving to more economical locations 7. Some indications suggest that downsizing efforts have not lived up to expectations. According to a recent survey of 52 Fortune 100 firms, most firms that announced a downsizing campaign showed worse, rather than better, financial performance in the years that followed. 8. There are several reasons why so many downsizing efforts fail to meet expectations. These reasons include: a. Negative results b. Loss of talent c. Disrupts the social networks d. Need to rehire e. Survivors become self-absorbed and afraid to take risks f. Negative publicity 9. Many problems with downsizing can be reduced with better planning.

10. Early-Retirement Programs: These are another way to reduce a labor surplus. Such programs are a way to encourage older workers to leave voluntarily by offering early-retirement incentives. 11. The average age of the U.S. workforce is increasing. There are several forces that fuel the drawing out of older workers’ careers such as: a. Improved health b. Decreased physical requirements of jobs c. Fear of Social Security being cut d. Insufficient employer-sponsored pensions e. Age discrimination laws f. Outlawing of mandatory retirement ages 12. Many organizations are moving from early-retirement programs to phasedretirement programs. In these programs, the organization can continue to enjoy the experience of older workers while reducing the number of hours that these employees work as well as the cost of those employees. 13. Employing Temporary and Contract Workers: The most widespread methods for eliminating a labor shortage are hiring temporary workers and outsourcing work. 14. Temporary Workers: Temporary employment is popular with employers because it gives them flexibility and lowers costs. 15. Agencies that provide temporary employees may handle some of the tasks associated with hiring, such as testing and training, 16. Temporary workers may offer benefits not available from permanent workers such as bringing an objective point of view to the organization’s problems and procedures and providing a great deal of experience gained while working in other organizations. 17. To benefit from using contract or temporary workers, organizations must overcome the disadvantages associated with this type of labor force. One drawback is that tension often exists between temporary and permanent employees.

18. Ways in which organizations can better manage the situation of contract or temporary workers include: a. Complete downsizing efforts prior to bringing in temporary workers b. Avoid treating temporary workers as second-class citizens 19. Outsourcing: Contracting with another organization to perform a broad set of services is called outsourcing. 20. A major reason for outsourcing can save money is that the outside company specializes in the services and can benefit from economies of scale. 21. Outsourcing is logical when an organization lacks certain kinds of expertise and doesn’t want to invest in developing that expertise. 22. Technological advances in computer networks and transmission have speeded up the outsourcing process and have helped it spread beyond manufacturing areas and low-skilled jobs. 23. Outsourcing manufacturing may make good sense in the short term, but it may ultimately hurt U.S. firms’ competitiveness due to a decreased lack of in-house knowledge and expertise. 24. Organizations that are interested in outsourcing should plan how they will avoid problems like giving up direct control of a particular operation. Other problems include quality-control issues, security violations, and poor customer service. 25. Overtime and Expanded Hours: Organizations facing a labor shortage may be reluctant to hire employees, even temporary ones, or to commit to an outsourcing arrangement. They may choose to expand working hours and pay overtime to current employees instead. However, overtime is most suited for short-term labor shortages. C. Implementing and Evaluating the HR Plan 1. The final stage of human resource planning involves implementing the strategies and evaluating the outcomes. 2. When implementing the HR strategy, the organization must hold some individual accountable for achieving the goals.

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In evaluating the results, the most obvious step is checking whether the organization has succeeded in avoiding labor shortages or surpluses. The evaluation should identify which parts of the planning process contributed to success or failure.

III. Recruiting Human Resources 1. The role of human resource recruiting is to build a supply of potential new hires that the organization can draw on if the need arises. 2. Recruiting consists of any practice or activity carried on by the organization with the primary purpose of identifying and attracting potential employees. 3. Because of differences in companies’ strategies, they may assign different degrees of importance to recruiting. In general, all companies have to make decisions in three areas of recruiting: personnel policies, recruitment sources, and the characteristics and behavior of the recruiter. Figure 5.2 on page 171 shows how these aspects of recruiting can have different effects on whom the organization ultimately hires. Personnel policies influence characteristics of the positions to be filled. Recruitment sources influence the kinds of job applicants an organization reaches. And the nature and behavior of the recruiter affect the characteristics of both the vacancies and the applicants. IV. Personnel Policies 1. An organization’s personnel policies are its decisions about how it will carry out human resource management, including how it will fill job vacancies. 2. Several personnel policies are especially relevant to recruitment: a. Recruiting existing employees to fill vacancies or hiring from outside the organization b. Meeting or exceeding the market rate of pay c. Emphasizing job security or the right to terminate employees d. Images of the organization conveyed in its advertising

A. Internal versus External Recruiting 1. Opportunities for advancement make a job more attractive to applicants and employees. 2. As personnel policies, decisions about internal versus external recruiting affect the nature of jobs. Promote-from-within policies signal to job applicants that the company provides opportunities for advancement. B. Lead-the-Market Pay Strategies 1. Pay is an important job characteristic for almost all applicants. Organizations have a recruiting advantage if their policy is to pay more than the current market wage for a job. 2.

Increasingly, organizations that compete for applicants based on pay do so using forms of pay other than wages or salary.

D. Image Advertising 1. Advertising designed to create a generally favorable impression of the organization is called image advertising. 2. Image advertising is especially important for organizations in highly competitive labor markets that perceive themselves as having a bad image. 3. Whether the goal is to influence the perception of the public in general or specific segments of the labor market, job seekers form beliefs about the nature of the organization well before they have any direct interviewing with these companies. V.

Recruitment Sources 1. Another critical element of an organization’s recruitment strategy is its decisions about where to look for applicants. 2. The method and audiences the organization chooses for communicating its labor needs will determine the size and nature of the labor market the organization taps to fill its vacant positions. A. Internal Sources 1. An organization may emphasize internal or external sources of job applicants. 2. Internal sources are employees who currently hold other positions in the organization.

3. Organizations recruit existing employees through job postings – communicating information about vacancies on bulletin boards, in employee publications, on corporate intranets, and anywhere else the organization communicates with employees. 4. For the employer, relying on internal sources offers several advantages such as: a. Generates applicants well known to the organization b. Applicants are relatively knowledgeable about the organization’s vacancies c. Faster and less expensive than external recruiting B. External Sources 1. Organizations often have good reasons to recruit externally such as: a. No internal recruits available b. Bring in new ideas or new ways of doing business 2. Organizations often recruit through direct applicants and referrals, advertisements, employment agencies, schools, and Web sites. 3. Direct Applicants and Referrals: Direct applicants are people who apply for a vacancy without prompting from the organization. Referrals are people who apply because someone in the organization prompted them to do so. 4. One advantage is that many direct applicants are to some extent already “sold” on the organization. This process is called self-selection. A form of aided self-selection occurs with referrals. 5. Many job seekers use social networks to help find employment. 6. A benefit of such sources is that they cost less than formal recruiting efforts. Considering these combined benefits, referrals and direct applicants are among the best sources of new hires. 7. Some employers offer current employees financial incentives for referring applicants who are hire and perform acceptably on the job. Other companies play off their good reputations in the labor market to generate direct applicants. 8. A major downside of referrals is that they limit the likelihood of exposing the organization to fresh viewpoints.

9. Sometimes referrals contribute to hiring practices that appear unfair such as nepotism. This is the hiring of relatives. 10. Electronic Recruiting: The Internet has opened up new vistas for organizations trying to recruit talent. There are many ways to employ the Internet for recruiting. 11. One of the easiest ways to get into “e-cruiting” is simply to use the organization’s own Web site to solicit applicants. Advertisements in Newspapers and Magazines: These ads typically generate a less desirable group of applicants than direct applicants or referrals and do so at greater expense. 12. Public Employment Agencies: Employers can register their job vacancies with their local state employment office and the agency will try to find someone suitable, using its computerized inventory of local unemployed individuals. 13. The government also provides funding to a variety of local employment agencies. 14. Private Employment Agencies: Private employment agencies provide much the same service as public employment agencies, but primarily serve the white-collar labor market. 15. Another difference between the two types of agencies is that private agencies charge employers for providing referrals. 16. For managers or professionals, an employer may use the services of a type of private agency called an executive search firm (ESF). People often call these agencies “headhunters”. 17. Colleges and Universities: On campus interviewing is the most important source of recruits for entry-level professional and managerial vacancies. Participating in university job fairs is another way of increasing the employer’s presence on campus. C. Evaluating the Quality of a Source 1. In general, there are few rules that say what recruitment source is best for a given job vacancy. It is wise for employers to monitor the quality of all their recruitment sources. One way to do this is to develop and compare yield ratios for each source. This ratio expresses the percentage of applicants who successfully move from one stage of the recruitment and selection process to the next. 2. Another measure of recruitment is the cost per hire. 3. Table 5.3 on page 181 looks at examples of how HR professionals can use these measures.

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Recruiter Traits and Behaviors 1. The recruiter affects the nature of both the job vacancy and the applicants generated. Many applicants approach the recruiter with some skepticism and sometimes discount what the recruiter has to say. The recruiter’s characteristics and behaviors seem to have limited impact on applicants’ job choices. A. Characteristics of the Recruiter 1. In general, applicants respond more positively to recruiters whom they perceive as warm and informative. The impact of other characteristics of recruiters including their age, sex, and race, is complex and inconsistent. B. Behavior of the Recruiter 1. Many studies have looked at how well realistic job previews – background information about jobs’ positive and negative qualities – can help organizations minimize turnover among new employees. 2. For affecting whether people choose to take a job, the recruiter seems less important than an organization’s personnel policies that directly affect the job’s features. C. Enhancing the Recruiter’s Impact 1. Although recruiters may have little influence on job choice, this does not mean recruiters cannot have an impact. Researchers have tried to find conditions in which recruiters do make a difference. Based on this research, an organization can take several steps to increase the impact that recruiters have on the people they recruit such as: a. Can provide timely feedback b. Can avoid behaving in ways that convey the wrong impressions about the organization c. Can recruit with teams rather than individual recruiters

Chapter Vocabulary Forecasting Trend Analysis Leading Indicators Transitional Matrix Core Competency Downsizing Outsourcing Job Posting Direct Applicants Referrals Nepotism Yield Ratio Realistic Job Preview...