HR Business Plan Template: Everything You Need to Know
With an HR business plan template, you can help your company recruit new employees, retain existing employees, and guide the development of the workforce. 4 min read
With an HR business plan template, you can help your company recruit new employees, retain existing employees, and guide the development of the workforce so that you collectively meet your business objectives, regardless of any changes in the industry or economy.
When creating your HR business plan, you need to perform a needs analysis of your workplace to tailor the plan to your company's requirements. You'll also need to learn about the industry standards for your field to make sure you're competitive.
Without such a plan in place, your workers will feel unprepared and won't know how to work towards your company's overall goals.
Steps for Developing a Human Resources Department Business Plan
There are several steps to creating an HR business plan. They include:
- Clarify the requirements . While you might be tempted to create a detailed plan that encompasses the entire company's next 10 years, hold off. Always talk with your boss to see how much detail he or she would like in the plan. This will save you time and help streamline the process. However, there's no harm in creating your own personalized strategic plan for your specific department.
- Read through the HR job descriptions . The HR department typically has employees such as HR assistants, HR generalists, and an HR director . Read through the job descriptions for each worker in the department and see what kind of duties are missing. Brainstorm additional functions that each job role could provide to the company.
- Curate your list . Take the different functions you've brainstormed and compare them to what each member of the HR department is already doing. Are there functions you could add or subtract from each employee for more productivity? You don't have to go into detail here, but just think about how you could improve each role.
- Schedule a meeting with the executives . Before you make any changes, you'll obviously need to get input and approval from the company's executives. They may have more feedback on how the HR department can provide additional services and support the company's overall goals and mission.
- Create a feedback form . Come up with a list of questions to ask leadership about HR's role in the company and provide it to them in advance of the meeting so they have time to think it over and talk with their staff. You may even want to provide a rating and ranking format for the questions, as this will make their responses easy to understand and implement. Overall, this is a key process to understanding what management and employees want and need from the HR department.
- Look at external resources . While the internal information you're collecting is the most important, it also doesn't hurt to take a look at data from professional organizations and websites, such as the Society for Human Resource Management , The Balance , or HR Magazine . You can also ask colleagues from other local organizations for tips on creating your business plan.
- Use this information to make a plan . With your ideas, feedback from executives, and tips from external resources, you should have a clear idea of what your plan should look like. The things that are missing from the HR department should now be clear, and this should guide you on what to focus on to improve HR's contribution to the company.
- Identify goals for this year and next . While your plan can have long-term goals, keep the majority of them a little bit shorter in scope to see how things work out. This gives you the chance to reorganize and restructure if things aren't going right. Consider creating a list of accomplishments you can reach for the end of this year and into the next.
A Real Life Example
If you're seeking more guidance on how to create a successful HR business plan, look to Starbucks as an example.
As the world's largest coffee chain, Starbucks had $21.3 billion in sales in 2016.
Despite these massive numbers, Starbucks maintains the same approach to their human resources department. All of the HR planning is guided by the company's organizational strategy and brand.
Their strategy is to use specific interview techniques when hiring new employees. This lets them identify potential leaders and place them in a "New Partner Orientation and Immersion" training program. With this system, Starbucks has achieved the lowest employee turnover rate in the quick-service restaurant industry.
Starbucks also offers numerous employee perks and dedicates a lot of time to employee training through an online portal that teaches employees essential job skills.
If you need help with your HR business plan template, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.
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Management and Human Resources Business Plans
The management portion of your business plan, the hr portion of your business plan, frequently asked questions (faqs).
As a startup, it’s never easy to come up with a business plan, let alone the management and human resources sections of a business plan. Despite that, it’s important that you start your business plan for human resources as soon as possible. Doing so gives your management goals a plan that will guide you and keep your business on track as it grows.
The key components of your human resources business plan should include your organizational structure, the philosophy and needs of your HR department, the number of employees you want to hire, how you plan to manage them, and all the estimated costs related with personnel.
You’ll want to start your HR business plan by outlining your own managerial experience and skills as well as those of your team. Highlight the roles of each member of your team, and any particular areas of strength or deficiency in your personnel lineup. For example, your HR team may be strong in compliance and conflict resolution but weak in hiring.
Don't worry if you don’t have a complete team in place when you write your HR business plan. Simply use this section to outline the organizational structure along with job descriptions, how you plan to recruit key team members, and what their responsibilities will be.
This section should look like a pyramid with you at the top and will likely have lateral positions. Be as specific as possible when defining an employee's responsibilities because this is what will drive your business.
Do You Need an HR Manager?
If you’re a solo practitioner, you may not think of including an HR manager in your management business plan. However, if you expect to hire non-managerial employees (such as salespeople or clerical workers), you should consider recruiting a human resources manager.
If hiring a human resources manager can’t be done, consider a human resources consultant. Human resource management requires an immense amount of time and paperwork, and an experienced HR consultant will be able to quickly get your payroll and benefits program up and running, affording you more time to concentrate on growing the business. Human resource responsibilities should include:
- Handling FICA and unemployment taxes and paperwork
- Ensuring compliance with the Family and Medical Leave Act
- Staying on top of IRS filings
There are plenty of companies that offer HR management platforms tailored to each business's needs. Research these companies and be sure to include their estimated cost in your HR business plan.
When you develop the HR portion of your business plan, begin by including a brief overview of your HR strategy. Investors may be curious about how your payroll will be handled and the associated costs of administering it, as well as the type of corporate culture you plan to create. Specific items to highlight in the HR section include:
- Payscale: Show the salaries for managers and non-managers based on the market for those jobs.
- Vacation time: Describe your vacation-time policy. How much time do employees get? How quickly does it accrue? Vacation time is not required by law, but most firms offer vacation time to stay competitive and keep employees refreshed.
- Insurance: Health insurance is a common staple benefit, although skyrocketing prices have forced many firms to cut back on this benefit. If you can’t afford a health plan, look into subsidizing one with employees paying the rest. Alternatively, inquire if a professional insurance representative can help you get a bulk rate.
- Additional benefits: Other things to consider include life insurance, a 401(k) and matching funds, bereavement leave, religious and floating holidays, and a bonus structure, if applicable.
In addition to the key elements above, it helps to have a framework from which to build your HR business plan. Here’s a basic outline that can help you get started:
- Figure out what your human resources department would need.
- Determine a strategy for recruiting talent.
- Formulate your hiring process.
- Develop a training program for new employees.
- Determine how much you want to pay your team (this is a good spot for payscale info)
- Create performance standards
It may be overwhelming to contemplate these benefits and their costs in the early stages of setting up your business, but in a competitive labor market, your firm needs to offer enough to entice qualified people and, more importantly, to keep them happy.
Consider revisiting your management and HR business plans every couple of years to see if you need to create action steps to refine your processes.
What should be in an HR business plan?
An HR business plan should include a mix of the steps you plan to take to launch an effective HR department, as well as specifics about how you plan to handle time off, insurance, and other benefits you plan to offer.
How do I write a human resources plan?
It helps to start with a simple framework. Try to break the plan down into sections: HR needs, recruitment, hiring, training, pay, and performance reviews. From there, incorporate other aspects of HR, like benefits and promotions.
U.S. Chamber of Commerce. " Does Your Small Business Need an HR Department? "
University of Minnesota. “ Human Resources Management: 2.2 Writing the HRM Plan .”
Mecklenburg County, North Carolina. “ FY 2020-2022 Strategic Business Plan: Human Resources .”
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10+ SAMPLE HR Business Plan in PDF
Hr business plan, 10+ sample hr business plan, what is a hr business plan, areas of human resources, tips to improve human resource management , how to create a hr business plan, what is a hr business plan, how do you write a human resources business plan, what are the 7 major hr activities.
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11+ HR Strategic Plan Templates – PDF, Word
With every business, there’s always going to be a common goal that everyone will be working towards. However, how everyone will go about in achieving them might differ and that could highly affect the business’s success. For those in human resources , there has to be some sort of sample plan in order for them to figure out exactly what and who it is the business will need in order to attain success.
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How to Create an HR Strategic Plan
1. determine the human resource needs.
- Are the number of employees hired enough?
- Is there are a need to hire more?
- Is the hiring process tedious and is it difficult to find the employees needed?
- What are the different skills that your current employees possess?
- What skills and knowledge will the employees need in order to live up to expectations?
- Is there anyone who plans on retiring or resigning soon? Do you already have replacements ready for when they do?
- What are the sales forecast and how will they affect your business’s recruitment strategies ?
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2. Recruitment
3. selection.
- The amount of time it will take for you to go through the many different resumes
- The amount of time it will take to interview every single candidate
- The number of expenses it will take to interview every applicant
- The possible travel expenses for a new hire or a recruiter
- The possible relocation expenses for a new hire
- The cost of training these new hires to get up-to-date with what needs to be done
4. Determine Compensation
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5. Develop the Appropriate Training
6. performance appraisal.
- Career development review
- Performance review
- Employee appraisals
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HR Consulting Business Plan Template
Written by Dave Lavinsky
Human Resources Consulting Business Plan
Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their human resources consulting businesses. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through an HR consulting business plan template step-by-step so you can create your plan today.
Download our Ultimate Business Plan Template here >
What Is a Business Plan?
A business plan provides a snapshot of your human resources consulting business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan
If you’re looking to start an HR consulting business or grow your existing business, you need to write your own business plan. A business plan will help you raise funding, if needed, and plan out the growth of your HR consulting business in order to improve your chances of success. Your business plan is a living document that should be updated annually as your company grows and changes.
Sources of Funding for Human Resources Consulting Businesses
With regards to funding, the main sources of funding for a human resources consulting business are personal savings, credit cards, bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the lender will not only want to confirm that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings is the most common form of funding for a human resources consulting business. Personal savings and bank loans are the most common funding paths for HR consulting businesses.
If you want to start an HR consulting business or expand your current one, you need a business plan. Below we detail what should be included in your own business plan for an HR consulting firm.
Executive Summary
Your executive summary provides an introduction to your own business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of HR consulting business you are operating and its status. For example, are you a startup, do you have an HR consulting firm that you would like to grow, or are you operating human resources consulting firms in multiple markets?
Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the HR consulting industry. Discuss the type of HR consulting business you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.
Company Analysis
In your company analysis, you will detail the type of HR consulting business you are operating.
For example, you might operate one of the following types of human resources consulting businesses:
- Human Capital Strategy : this type of business focuses on strategic matters such as corporate culture, diversity, and organization design.
- Compensation & Benefits: this type of business involves analyzing and consulting on all aspects of employee compensation, from base pay to secondary benefits, as well as pension and retirement.
- Talent Management: this type of business focuses primarily on recruitment and retention of talent, as well as on talent development.
- Professional Development: this type of business offers services ranging from leadership coaching and development to developing learning management systems.
In addition to explaining the type of HR consulting business you will operate, the Company Analysis section of your business plan needs to provide background on the business.
Include answers to questions such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include the number of websites launched, the types of sites developed, etc.
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
Industry Analysis
In your industry analysis, you need to provide an overview of the HR industry.
While this may seem unnecessary, it serves multiple purposes.
First, researching the HR industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy, particularly if your research identifies market trends.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your HR consulting business plan:
- How big is the human resources industry (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your human resources consulting business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
Customer Analysis
The customer analysis section of your HR consulting business plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: financial services companies, government entities, healthcare institutions, and technology companies.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of human resource consulting business you operate. Clearly, government entities would respond to different marketing promotions than technology companies, for example.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations, and income levels of the customers you seek to serve. Because most HR consulting businesses primarily serve customers living in the same city or town, such demographic information is easy to find on government websites.
Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.
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Competitive Analysis
Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other human resource consulting firms.
Indirect competitors are other options that customers have to purchase from that aren’t direct competitors. This includes more generalized management consultants or dedicated in-house HR teams.
With regards to direct competition, you want to describe the other HR consulting businesses with which you compete. Most likely, your direct competitors will be human resource consulting businesses located very close to your location.
For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of customers do they serve?
- Do they specialize in specific industries (i.e. healthcare, technology, etc.)?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide either a wider range or more specialized range of services?
- Will you offer virtual service options?
- Will you provide superior customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Marketing Plan
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For an human resource consulting business, your marketing plan should include the following:
Product : In the product section, you should reiterate the type of HR consulting company that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, in addition to strategic consulting, will your HR consulting business provide compliance consulting?
Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.
Place : Place refers to the location of your company. Document your location and mention how the location will impact your success. For example, will you operate from a physical office, or will you primarily interact with clients online and/or at their place of business? In this section, discuss how your location will affect the demand for your services.
Promotions : The final part of your marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:
- Advertising in local papers and magazines
- Reaching out to local websites
- Signs and billboards
- Social media marketing
- Local radio advertising
Operations Plan
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your HR consulting business, including marketing, providing consultations, building analytics processes, developing and presenting recommendations, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to sign your 50 th consulting contract, or when you hope to reach $X in revenue. It could also be when you expect to open an HR consulting business in a new location.
Management Team
To demonstrate your HR consulting business’ ability to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow your business.
Ideally you and/or your team members have direct experience in human resources and/or managing HR consulting businesses. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in Human Resources, or successfully running small businesses.
Financial Plan
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.
Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you focus on one client at a time, or will you have teams working on multiple projects at once? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance Sheets : Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement : Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.
In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing an hr consulting business:
- Office build-out
- Cost of buying or leasing a company vehicle
- Cost of office supplies such as computers and software
- Payroll or salaries paid to staff
- Business insurance
- Taxes and permits
- Legal expenses
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office lease, any notable clients you’ve served, or an overview of the services you offer.
Putting together a business plan for your HR consulting business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the HR industry, your competition, and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful HR consulting business.
HR Consulting Business Plan FAQs
What is the easiest way to complete my hr consulting business plan.
Growthink's Ultimate Business Plan Template allows you to quickly and easily complete your HR Consulting Business Plan.
What is the Goal of a Business Plan's Executive Summary?
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of HR consulting business you are operating and the status; for example, are you a startup, do you have an HR consulting business that you would like to grow, or are you operating a chain of HR consulting businesses?
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How to Develop a Human Resources Department Business Plan
What is management plan in a business plan, fundamentals of human resources strategic planning.
- Setting the vision statement and mission statement of the company, as well as the business goals and objectives.
- Learning the executive summary of the business plan.
- Know and understand the business strategies and how these strategies can develop a company.
- Establishing the objective statement of the human resource strategic planning.
How to Create a Human Resource Department Annual Strategic Plan?
- Selection and training. It involves finding applicants and hiring the most qualified individual for the position.
- Training and development. Improving the skills of the employee and meeting the employee’s need.
- Benefits administration. Providing benefits package to the employees can increase the chance of retaining them
- Employee relations. The human resource strategic plan should focus on the maintaining safety and work-friendly environment.
How to Design and Implement an HR Strategy?
- Define the company’s vision statement. The company’s vision statement will serve as a guide on how the HR can help the company in reaching the smart goals .
- Establish the HR department’s role. The role of HR in the company is countless. The company must set what specific role an HR must do.
- Implement the plan. After the strategy has been developed, the implementation plan is now ready to implement. With the help of the HR strategy, the plan can be developed to help the business improve.
- Measure the success. The success of the strategy must be measured to make the HR strategy more effective.
Steps to Develop a Human Resources Department Business Plan
- Understand what your boss needs and wants from you. It will be painful for you to have developed a plan that the boss didn’t want or need.
- Create a list of job descriptions. Find out if there are job descriptions your department is not performing but would value to the company if it is performed.
- Add to the list the functions that your human resources department is already performing. You can also add those functions that you want to add or subtract.
- Consult with your fellow executives. Get an assessment plan of their satisfaction with your services.
The Link Between Strategic Planning and Human Resource Planning
- The technologies used in manufacturing and producing a product
- The finances in the financial statement that is used to pay what the expense report of a company.
- And the people with skills and talents that are used achieve the work that is crucial.
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Develop a Successful Human Resources Department Business Plan
Plan to chart your business course for success and contribution.
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Susan Heathfield is an HR and management consultant with an MS degree. She has decades of experience writing about human resources.
If you’re a department leader, your boss will likely one day ask this question: “What is your business plan for your department?” As the leader of the Human Resources function, you can use these steps to answer that question.
A frequently asked question at this website, it’s a difficult question to answer in a generic fashion because the needs of every company for the contribution of the HR department can differ widely. You can, however, use these steps as a guide as you develop your own HR business plan.
Your Human Resources department business plan depends on your needs analysis of your own workplace. Your Human Resources department business plan also depends on learning about and benchmarking industry standards outside of your organization.
But, the fundamental question you need to answer, to reply to your boss’s question, is, “What does your workplace need from the HR function?” Here’s how you can find the answer.
Steps to Develop a Human Resources Department Business Plan
- Start your Human Resources department business plan by clarifying exactly what your boss needs and wants from you and in how much detail. You don’t want to spend hours and hours developing information or a detailed plan that the boss doesn’t need or want. That said, for your own clear purpose and direction, your own strategic plan for your department, this approach will yield great value.
- Read through the detailed job descriptions that have been developed for the HR Director/VP , HR Generalist , and HR Assistant . Are there functions listed in these job descriptions that you are not performing that you could perform that would add value to your organization? Start a function list. You can also use a commercially developed Human Resources department audit book/program or an occasional free Human Resources department audit plan list.
- Take a look at this list, plus add to the list, the functions that your Human Resources department is already performing and functions that you know you want to add—or subtract. Minute detail is not required until you are ready to put together your Human Resources department business plan when you complete these steps.
- Meet with your fellow executives to obtain an assessment of their current satisfaction with your services, additional services they’d like you to add, and their ideas about how HR can best support your organization’s mission , vision , and goals. Supply the questions to your key colleagues in advance of your meeting. Inform them that you have distributed the questions in advance so that they can solicit feedback from their staff, too. If you have effectively gathered the above internal and external information, you may be able to present the choices in a rating and ranking format. This is the key step within your organization for assessing what the line management and the employees want from the HR function. Of course, there are administrative and counseling functions that they might never consider asking you to provide that you will continue to provide as part of a professional HR function. The purpose of asking is to find the offerings that your customers think they need most.
- You are developing a great deal of internal information about your company’s HR needs. You might also look at recent journals from professional associations such as the Society for Human Resource Management (SHRM). Talk with colleagues in any local associations you attend. Take a look at literature available such as HR Magazine . The articles from this section of TheBalance.com are particularly useful for planning the priorities and scope of the HR department business plan.
- Once you have gathered all of this information, or even, just enough—your executives’ priorities may give you extremely clear direction, for example—you can make a plan. You can see what you are missing in your HR department, what you might expand, what you need to focus on strategically to build your department’s contribution, and what you may currently offer that is not needed.
- From these identified missions, prioritize and make a plan, based on resources and your preferred method of presentation or accomplishment, of what you can accomplish this year and next. Some solutions may be HRIS-based needs ; others may have to do with HR office offerings; others may require a strategic change in direction or the addition of a major function. You won’t know until you study and ask.
Now, at last, you can answer your boss’s question: What is your business plan for your HR department?
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2.2 Writing the HRM Plan
Learning objective.
- Describe the steps in the development of an HRM plan.
As addressed in Section 2.1 “Strategic Planning” , the writing of an HRM strategic plan should be based on the strategic plans of the organization and of the department. Once the strategic plan is written, the HR professional can begin work on the HR plan. This is different from the strategic plan in that it is more detailed and more focused on the short term. The six parts described here are addressed in more detail in Chapter 4 “Recruitment” , Chapter 5 “Selection” , Chapter 6 “Compensation and Benefits” , Chapter 7 “Retention and Motivation” , Chapter 8 “Training and Development” , Chapter 9 “Successful Employee Communication” , Chapter 10 “Managing Employee Performance” , and Chapter 11 “Employee Assessment” .
How Would You Handle This?
Compensation Is a Touchy Subject
As the HR manager, you have access to sensitive data, such as pay information. As you are looking at pay for each employee in the marketing department, you notice that two employees with the same job title and performing the same job are earning different amounts of money. As you dig deeper, you notice the employee who has been with the company for the least amount of time is actually getting paid more than the person with longer tenure. A brief look at the performance evaluations shows they are both star performers. You determine that two different managers hired the employees, and one manager is no longer with the organization. How would you handle this?
As you can see from this figure, the company strategic plan ties into the HRM strategic plan, and from the HRM strategic plan, the HR plan can be developed.
The six parts of the HRM plan include the following:
- Determine human resource needs. This part is heavily involved with the strategic plan. What growth or decline is expected in the organization? How will this impact your workforce? What is the economic situation? What are your forecasted sales for next year?
- Determine recruiting strategy. Once you have a plan in place, it’s necessary to write down a strategy addressing how you will recruit the right people at the right time.
- Select employees. The selection process consists of the interviewing and hiring process.
- Develop training. Based on the strategic plan, what training needs are arising? Is there new software that everyone must learn? Are there problems in handling conflict? Whatever the training topics are, the HR manager should address plans to offer training in the HRM plan.
- Determine compensation. In this aspect of the HRM plan, the manager must determine pay scales and other compensation such as health care, bonuses, and other perks.
- Appraise performance. Sets of standards need to be developed so you know how to rate the performance of your employees and continue with their development.
Each chapter of this text addresses one area of the HR plan, but the next sections provide some basic knowledge of planning for each area.
Determine Human Resource Needs
The first part of an HR plan will consist of determining how many people are needed. This step involves looking at company operations over the last year and asking a lot of questions:
- Were enough people hired?
- Did you have to scramble to hire people at the last minute?
- What are the skills your current employees possess?
- What skills do your employees need to gain to keep up with technology?
- Who is retiring soon? Do you have someone to replace them?
- What are the sales forecasts? How might this affect your hiring?
These are the questions to answer in this first step of the HR plan process. As you can imagine, this cannot be done alone. Involvement of other departments, managers, and executives should take place to obtain an accurate estimate of staffing needs for now and in the future. We discuss staffing in greater detail in Chapter 4 “Recruitment” .
Many HR managers will prepare an inventory of all current employees, which includes their educational level and abilities. This gives the HR manager the big picture on what current employees can do. It can serve as a tool to develop employees’ skills and abilities, if you know where they are currently in their development. For example, by taking an inventory, you may find out that Richard is going to retire next year, but no one in his department has been identified or trained to take over his role. Keeping the inventory helps you know where gaps might exist and allows you to plan for these gaps. This topic is addressed further in Chapter 4 “Recruitment” .
HR managers will also look closely at all job components and will analyze each job. By doing this analysis, they can get a better picture of what kinds of skills are needed to perform a job successfully. Once the HR manager has performed the needs assessment and knows exactly how many people, and in what positions and time frame they need to be hired, he or she can get to work on recruiting, which is also called a staffing plan . This is addressed further in Chapter 4 “Recruitment” .
Recruitment is an important job of the HR manager. More detail is provided in Chapter 4 “Recruitment” . Knowing how many people to hire, what skills they should possess, and hiring them when the time is right are major challenges in the area of recruiting. Hiring individuals who have not only the skills to do the job but also the attitude, personality, and fit can be the biggest challenge in recruiting. Depending on the type of job you are hiring for, you might place traditional advertisements on the web or use social networking sites as an avenue. Some companies offer bonuses to employees who refer friends. No matter where you decide to recruit, it is important to keep in mind that the recruiting process should be fair and equitable and diversity should be considered. We discuss diversity in greater detail in Chapter 3 “Diversity and Multiculturalism” .
Depending on availability and time, some companies may choose to outsource their recruiting processes. For some types of high-level positions, a head hunter will be used to recruit people nationally and internationally. A head hunter is a person who specializes in matching jobs with people, and they usually work only with high-level positions. Another option is to use an agency that specializes in hiring people for a variety of positions, including temporary and permanent positions. Some companies decide to hire temporary employees because they anticipate only a short-term need, and it can be less expensive to hire someone for only a specified period of time.
No matter how it is done, recruitment is the process of obtaining résumés of people interested in the job. In our next step, we review those résumés, interview, and select the best person for the job.
After you have reviewed résumés for a position, now is the time to work toward selecting the right person for the job. Although we discuss selection in great detail in Chapter 6 “Compensation and Benefits” , it is worth a discussion here as well. Numerous studies have been done, and while they have various results, the majority of studies say it costs an average of $45,000 to hire a new manager (Herman, 1993). While this may seem exaggerated, consider the following items that contribute to the cost:
- Time to review résumés
- Time to interview candidates
- Interview expenses for candidates
- Possible travel expenses for new hire or recruiter
- Possible relocation expenses for new hire
- Additional bookkeeping, payroll, 401(k), and so forth
- Additional record keeping for government agencies
- Increased unemployment insurance costs
- Costs related to lack of productivity while new employee gets up to speed
Because it is so expensive to hire, it is important to do it right. First, résumés are reviewed and people who closely match the right skills are selected for interviews. Many organizations perform phone interviews first so they can further narrow the field. The HR manager is generally responsible for setting up the interviews and determining the interview schedule for a particular candidate. Usually, the more senior the position is, the longer the interview process takes, even up to eight weeks (Crant, 2009). After the interviews are conducted, there may be reference checks, background checks, or testing that will need to be performed before an offer is made to the new employee. HR managers are generally responsible for this aspect. Once the applicant has met all criteria, the HR manager will offer the selected person the position. At this point, salary, benefits, and vacation time may be negotiated. Compensation is the next step in HR management.
Determine Compensation
What you decide to pay people is much more difficult than it seems. This issue is covered in greater detail in Chapter 6 “Compensation and Benefits” . Pay systems must be developed that motivate employees and embody fairness to everyone working at the organization. However, organizations cannot offer every benefit and perk because budgets always have constraints. Even governmental agencies need to be concerned with compensation as part of their HR plan. For example, in 2011, Illinois State University gave salary increases of 3 percent to all faculty, despite state budget cuts in other areas. They reasoned that the pay increase was needed because of the competitive nature of hiring and retaining faculty and staff. The university president said, “Our employees have had a very good year and hopefully this is a good shot in the arm that will keep our morale high” (Pawlowski, 2011).
Determination of compensation systems is a balancing act. Compensation should be high enough to motivate current employees and attract new ones but not so high that it breaks the budget.
Nathan Rupert – Venice Beach Tightrope Walker – CC BY-NC-ND 2.0.
The process in determining the right pay for the right job can have many variables, in addition to keeping morale high. First, as we have already discussed, the organization life cycle can determine the pay strategy for the organization. The supply and demand of those skills in the market, economy, region, or area in which the business is located is a determining factor in compensation strategy. For example, a company operating in Seattle may pay higher for the same job than their division in Missoula, Montana, because the cost of living is higher in Seattle. The HR manager is always researching to ensure the pay is fair and at market value. In Chapter 6 “Compensation and Benefits” , we get into greater detail about the variety of pay systems, perks, and bonuses that can be offered. For many organizations, training is a perk. Employees can develop their skills while getting paid for it. Training is the next step in the HR planning process.
Develop Training
Once we have planned our staffing, recruited people, selected employees, and then compensated them, we want to make sure our new employees are successful. Training is covered in more detail in Chapter 8. One way we can ensure success is by training our employees in three main areas:
- Company culture. A company culture is the organization’s way of doing things. Every company does things a bit differently, and by understanding the corporate culture, the employee will be set up for success. Usually this type of training is performed at an orientation, when an employee is first hired. Topics might include how to request time off, dress codes, and processes.
- Skills needed for the job. If you work for a retail store, your employees need to know how to use the register. If you have sales staff, they need to have product knowledge to do the job. If your company uses particular software, training is needed in this area.
- Human relations skills. These are non-job-specific skills your employees need not only to do their jobs but also to make them all-around successful employees. Skills needed include communication skills and interviewing potential employees.
Perform a Performance Appraisal
The last thing an HR manager should plan is the performance appraisal. While we discuss performance appraisals in greater detail in Chapter 11 “Employee Assessment” , it is definitely worth a mention here, since it is part of the strategic plan. A performance appraisal is a method by which job performance is measured. The performance appraisal can be called many different things, such as the following:
- Employee appraisal
- Performance review
- Career development review
No matter what the name, these appraisals can be very beneficial in motivating and rewarding employees. The performance evaluation includes metrics on which the employee is measured. These metrics should be based on the job description, both of which the HR manager develops. Various types of rating systems can be used, and it’s usually up to the HR manager to develop these as well as employee evaluation forms. The HR manager also usually ensures that every manager in the organization is trained on how to fill out the evaluation forms, but more importantly, how to discuss job performance with the employee. Then the HR manager tracks the due dates of performance appraisals and sends out e-mails to those managers letting them know it is almost time to write an evaluation.
Human Resource Recall
Have you ever been given a performance evaluation? What was the process and the outcome?
Communication Is Key in Performance Evaluations
(click to see video)
Communication is imperative in any workplace, but especially when giving and receiving a performance evaluation.
Key Takeaways
- Human resource planning is a process that is part of the strategic plan. It involves addressing specific needs within the organization, based on the company’s strategic direction.
- The first step in HR planning is determining current and future human resource needs. In this step, current employees, available employees in the market, and future needs are all analyzed and developed.
- In the second step of the process, once we know how many people we will need to hire, we can begin to determine the best methods for recruiting the people we need. Sometimes an organization will use head hunters to find the best person for the job.
- After the recruiting process is finished, the HR manager will begin the selection process. This involves setting up interviews and selecting the right person for the job. This can be an expensive process, so we always want to hire the right person from the beginning.
- HR managers also need to work through compensation plans, including salary, bonus, and other benefits, such as health care. This aspect is important, since most organizations want to use compensation to attract and retain the best employees.
- The HR manager also develops training programs to ensure the people hired have the tools to be able to do their jobs successfully.
- Of the parts of HR planning, which do you think is most difficult, and why? Which would you enjoy the most, and why?
- Why is it important to plan your staffing before you start to hire people?
- What is the significance of training? Why do we need it in organizations?
Crant, J., “How Long Does an Interview Process Take?” Jobsinminneapolis.com, December 2, 2009, accessed October 28, 2010, http://www.jobsinminneapolis.com/articles/title/How-Long-Does-an-Interview-Process-Take/3500/422 .
Herman, S., Hiring Right: A Practical Guide (Thousand Oaks, CA: Sage, 1993), xv.
Pawlowski, S., “Illinois State University to Get Salary Bump,” WJBC Radio, July 11, 2011, accessed July 11, 2011, http://wjbc.com/illinois-state-university-faculty-to-get-salary-bump .
Human Resource Management by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.
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