HR Planning, Forecasting, Turnover & Recruitment Notes

Planning, Job Analysis, and Design

  • Focus: planning human resources, forecasting, job analysis, and different approaches to job design.

  • KSAOs: Knowledge, Skills, Abilities, and Other characteristics used in job analysis and design.

  • Job Analysis Tools discussed:

    • Job Element Inventory (JEI)

    • Position Analysis Questionnaire (PAQ)

    • Fleishman System

    • Occupational Information Network (O*NET)

  • Job Analysis Review covered to connect analysis with planning and design.

  • Job Design Review covered four major approaches:

    • Motivational Approach: intrinsic motivation and job characteristics

    • Mechanistic Approach: redesign for speed and efficiency

    • Biological Approach: reduce physical fatigue and health problems

    • Perceptual–Motor Approach: focuses on mental capacities and limitations

What we plan to do (Planning)

  • Key questions:

    • What kind of human resources do we have?

    • What kind are we likely to need?

    • How do we align them? Which positions will we fill and how?

Forecasting (planning for supply and demand)

  • Purpose: determine supply and demand for human resources to predict labor shortages or surpluses.

  • Two main methods:

    • Demand forecasting

    • Supply forecasting

Demand Forecasting

  • Questions: How much labor will we need?

  • Methods:

    • Benchmarking: compare with similar businesses; assess differences

    • Statistical methods: e.g., historical sales/labor demand correlation next year

    • Educated guesses: consider new product launches, competitive moves, etc.

Supply Forecasting

  • Questions: How much labor will we have?

  • Focus: movement of people within the company (up, through, out) and external environment.

  • Environmental questions to consider:

    • What’s the unemployment rate?

    • Breakdown by age, gender, background of the people we would target

    • Seasonality in unemployment

Transition Matrix: a key tool in Supply Forecasting

  • Concept: Lists job categories held in one period (e.g., Sales Manager) and shows the proportion moving to each category in the future, including leaving the company (Exit).

  • Purpose: answers two questions – where did people go from a given job, and where did people come from into a given job?

  • Example (illustrative simplified version with categories A–E and Exit):

    • Rows = 2023 job category; Columns = destination categories in 2024 (A, B, C, D, E, Exit).

    • Each row sums to 1.0 (100%).


P = egin{pmatrix}
0.60 & 0.14 & 0.20 & 0.06 & 0.00 & 0.00\
0.12 & 0.60 & 0.08 & 0.20 & 0.00 & 0.00\
0.05 & 0.05 & 0.60 & 0.10 & 0.10 & 0.10\
0.80 & 0.00 & 0.00 & 0.00 & 0.00 & 0.20\
0.20 & 0.60 & 0.00 & 0.00 & 0.00 & 0.20

right)  

ext{(A, B, C, D, E, Exit destinations)}

  • Documentation example flows (from the transcript):

    • Initial headcounts (2023): A=50, B=75, C=100, D=200, E=300 → Total 725.

    • Flows (counts in parentheses):

    • From A: 30 stay in A; 7 to B; 10 to C; 3 to Exit.

    • From B: 9 to A; 45 stay in B; 6 to D; 15 to Exit.

    • From C: 5 to A; 5 to B; 60 stay in C; 10 to D; 10 to E; 10 to Exit.

    • From D: 160 to A; 40 to Exit.

    • From E: 60 to A; 180 to B; 60 to Exit.

  • Resulting transition probabilities reflect movement year-over-year between job categories and exits.

Turnover insights from the matrix (example interpretation)

  • Turnover counts (exits) by job 2023→2024:

    • Job A: Exit = 3 out of 50 → turnover ≈ rac{3}{50} = 0.06 = 6 rac{1}{2} ext{?} ≈ 6

    • Job B: Exit = 15 out of 75 → turnover = 20%

    • Job C: Exit = 10 out of 100 → turnover = 10%

    • Job D: Exit = 40 out of 200 → turnover = 20%

    • Job E: Exit = 60 out of 300 → turnover = 20%

  • Overall turnover ratio (from sums provided): roughly Turnover ext{ rate} \approx rac{3+15+10+40+60}{725} = rac{128}{725} \approx 0.1765 \,\approx \,18\%.

  • Which job has the lowest turnover? Job A (≈ 6%).

What we can learn from this matrix

  • Movement patterns reveal potential career paths and dead-ends (e.g., some jobs feed others more than they exit).

  • Identify high-exit points and consider HR policy changes to reduce unwanted exits.

  • Use to forecast headcount needs in different roles and plan development or succession accordingly.

Forecasting: Surplus vs. Shortage and corrective tactics

  • Forecasting results: Compare demand vs. supply to determine surplus or shortage.

  • If Supply > Demand: SURPLUS

  • If Supply < Demand: SHORTAGE

Correcting a surplus (quick summary of tactics)

  • Speed vs. Suffering vs. severity (from the slides):

    • Downsizing — Fast; High suffering

    • Pay reduction — Fast; High suffering

    • Demotions — Fast; High suffering

    • Work sharing — Fast; Moderate suffering

    • Hiring freeze — Slow; Low suffering

    • Natural attrition — Slow; Low suffering

    • Early retirement — Slow; Low suffering

Early retirement programs

  • Rationale: aging workforce; respond to surplus with voluntary exits.

  • Typical program: two weeks pay for every year of employment + continued healthcare plans for 18+ months + outplacement support.

  • Pros/cons: some employees welcome this; others find it complicated and emotional.

Downsizing (detailed section)

  • Definition: Planned elimination of large numbers of personnel to enhance competitiveness.

  • Common approaches: firing, layoff, attrition, transfer, job sharing, reduced workweek, early retirement.

  • Effects of downsizing:

    • Employee uncertainty and fear; impact on culture; rumors escalate.

    • Survivor syndrome: remaining employees may become risk-averse or isolated.

  • What about downsizing in practice?

    • 85% of Fortune 1000 firms downsized between 1987–2001 for cost reduction, technology adoption, decreased bureaucracy, or to pave way for foreign labor; 80% of these firms were profitable at the time of layoffs.

  • Reasons for downsizing (AMA survey results):

    • Reduced expenses; increased profits (46% achieving reduced expenses; 32% increased profits)

    • Improved cash flow; increased productivity (24%/22%)

    • Increased ROI and competitive advantage; reduced bureaucracy; improved decision making; increased customer satisfaction; increased sales and market share; improved product quality; other rationale (technological advances, innovation, avoidance of takeovers).

  • Important caveats: wrong people fired, loss of organizational memory, survivor effects, culture/climate damage; use with caution.

Shortages: how to correct a shortage

  • Tactics (with speed and revocability):

    • Overtime — Fast; High revocability

    • Temporary workers — Fast; High revocability

    • Outsourcing — Fast; High revocability

    • Retrained transfers — Slow; High revocability

    • Turnover reduction — Slow; Moderate revocability

    • New external hires — Slow; Low revocability

    • Technology change — Slow; Low revocability

Temporary workers (overview)

  • About 5–10% of the workforce are temporary employees (seasonal, temps, contract workers).

  • Advantages:

    • Saves benefits costs

    • Reduces need for selection and training

    • Brings in employees with diverse experiences

  • Disadvantages:

    • Potential friction with regular employees

    • Risk of creating a two-tier system; may limit extra-role behaviors

Outsourcing (and offshoring)

  • Benefits: quick solution, revocable; cost savings on benefits; reduces need for hiring and training; can leverage economies of scale; may bring in new capabilities from other firms.

  • Costs/risks: loss of control over performance management; possible long-term economic effects; may harm employee morale; cybersecurity risks; can contribute to offshoring overseas (offshoring = form of outsourcing where functions move to another country).

  • Offshoring: a special case of outsourcing where jobs are moved to another country.

  • Summary: Outsourcing has evolved from a crisis-response tactic to a long-term work-structure strategy.

The human side of HR: careers, ethics, and brand

  • A candid reminder: "A human resources career is not for nice people" — difficult decisions are part of corrections to surpluses.

  • Core commitment: Empathy; focus on big picture; aim to be fair, not necessarily nice.

  • Building the employee brand:

    • The goal is not only to increase applications but to find applicants with the right fit.

    • Emphasize different job aspects for different applicant types; promote internal opportunities; external hires can also be valuable.

    • Brand image matters for attracting the right talent.

Recruitment: process, sources, and measurement

  • Recruitment definition: The practices and activities firms use to identify and attract potential employees; used to staff, replace, and cope with shortages.

  • Three goals of recruitment:

    • Attract a lot of applicants

    • Attract applicants who fit the position

    • Increase likelihood of accepting offers

Key influences on recruitment decisions

  • Job choice: Vacancy characteristics influence applicant choice; applicant characteristics influence their job choice; recruiter traits and organizational policies influence applicants too; recruitment sources feed into recruitment influences.

Vacancy characteristics and job characteristics

  • Vacancy characteristics: How desirable is the vacancy? Noncompensatory vs. compensatory evaluation:

    • Noncompensatory: If it doesn’t meet a threshold (e.g., pay or proximity), applicants discard it.

    • Compensatory: Consider strengths across multiple attributes.

    • The implicit favorite concept: applicants compare other jobs to an exemplar.

  • Position characteristics (examples studied):

    • Pay

    • Job security

    • Advancement opportunities

    • Location

    • Benefits

    • Travel requirements

  • Actual rankings observed (from in-class exercise data):

    • Pay #1

    • Job security #2

    • Advancement opportunities #3

    • Location #4

    • Benefits #5

    • Travel requirements #6

Recruitment sources: internal vs external

  • Internal sources: Hiring from within (often cheaper and can introduce fresh ideas).

  • External sources: Advertisements, employment agencies, headhunters, colleges/universities, online recruiting, referrals, walk-ins, poaching from competitors.

  • Internal vs External: advantages and disadvantages summarized:

    • Internal: cheaper; preserves culture; limited in small firms or when seeking new ideas.

    • External: brings new skills; could be riskier; broader pool; online recruiting expands reach.

Recruitment sources: online recruiting

  • Advantages:

    • Efficiency; data entry by applicants; broad reach (e.g., large job boards with millions of resumes)

    • Data collection on demographics, intent, etc.

  • Disadvantages/Risks:

    • Equity concerns: do all candidates have equal access?

    • Self-selection bias: may attract many unqualified applicants

Yield ratios and cost per hire

  • Yield ratios measure the percentage of applicants advancing from one stage to the next in the process.

  • Cost per hire = total recruitment cost / number of hires for that vacancy type.

  • Use of yield ratios and cost per hire helps identify which sources are most valuable.

Informed self-selection and recruiter influence

  • Informed self-selection: candidates who fit the job are more likely to apply; those who don’t are less likely.

  • Current employees, referrals, and interns are more likely to self-select.

  • Gender differences exist in job-search behaviors (e.g., who applies).

  • Recruiter characteristics:

    • Small impact on initial acceptance, larger impact on likelihood of a second interview.

    • Often not trained; can inadvertently harm (e.g., poor behavior).

    • More effective when recruiting is done by a team rather than by a single recruiter.

Realistic Job Preview (RJP) and candidate fit

  • Realistic Job Preview (RJP) can improve perceptions of fairness and reduce initial turnover.

  • RJP is particularly important for diversity recruitment, but must reflect reality to avoid backfire.

Realistic job previews, diversity, and biases

  • Even with diverse hiring commitments, biases persist in recruitment.

  • Implicit bias can influence outcomes; resources exist to test and mitigate bias (e.g., implicit bias test links).

The firm’s recruitment branding and policy documents

  • Personnel policies and employer image matter for vacancy desirability and recruitment success.

  • Examples shown included notable brands and recruitment images to illustrate employer branding impact.

Practical recruitment measurements

  • Yield ratios and cost per hire are essential metrics to evaluate source effectiveness.

  • Online recruiting provides large reach but requires careful handling of equity and data quality.

Exam-ready quick reference

  • Planning questions: which roles to fill and how to fill them?

  • Forecasting: distinguish demand vs. supply forecasting; use transition matrices to model internal mobility.

  • Surplus vs. shortage tactics: know which tactics are fast vs. slow and their relative employee impact.

  • Recruitment fundamentals: main sources, internal vs external, yield ratios, cost per hire, and the role of recruiter characteristics.

  • Realistic previews and diversity: benefits, limitations, and how biases can intrude into recruitment; use RJP to improve fairness and reduce early turnover.

  • Ethical considerations: empathy, fairness, and big-picture focus when making HR decisions.