Student Question

What are the internal factors and external factors involved in the human resource planning process?

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Successful and dynamic human resource planing is central to the success of an organization. The aim of human resource planning is to maximize recruitment & retention, minimize employee issues and maximize employee productivity. A number of internal and external factors have to be considered when formulating human resource planning. 

  • Organizational structure: One of the key internal factors to determine the optimal staffing requirements is the organizational structure. Planners need to draw up a hierarchy chart of the organization and clearly delineate the functions of each designation; providing gaps for areas that need more employees and cutting out the people who do not have a defined function (or are not required).
  • Budget: It is a critical internal factor that determines how human resources are utilized. The total budgetary allocation determines how any people can be hired or retained or promoted, and if any retention program can take place. In lean times, HR planners can devise innovative solutions such as lower base pay, more stocks, better retirement benefits, etc.
  • Skill level of existing staff determines if new staff (with different set of skills) need to be hired or if training programs (or tuition reimbursement) can help build that skill set in the existing employee pool.
  • Productivity is an internal factor that can be enhanced by increasing job satisfaction among the employees. Annual reviews, better communication, wellness and team-building programs, etc. can help in this endeavor.
  • Competition is an external factor that will limit an organization's ability to recruit better talent and retain it. 
  • Compensation is a function of labor supply and is less in a crowded market vs. labor shortage times. HR planners need to continually evaluate and ensure that the compensation is market competitive.
  • Legislation is an external factor that affects the entire industry and HR planners need to ensure compliance with any legislation affecting the organization.

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