Chapter: Human Resource Objectives & Planning
Welcome to your study notes for Human Resource Objectives! People are at the very heart of every business organisation. Even the most innovative product or state-of-the-art machinery is useless without skilled, motivated, and well-organised people to run operations and deliver services. In this chapter, we will explore what human resource (HR) objectives are, why businesses set them, what influences them, and how organisations carry out human resource planning to ensure they have the right workforce in place.
Note on syllabus placement: This topic forms part of Unit 2: Managing operations, human resources and finance (Section 3.2.2.1). Later chapters explore Human resource data (measuring workforce performance), Organisational design, Motivation, and Employer-employee relations.
1. What are Human Resource Objectives?
Human resource (HR) objectives are the specific targets and goals set for the human resources functional area of a business over a given time period. Just like marketing or operations, the HR department must have clear goals so that all workforce-related decisions contribute to the organisation's overall success.
In simple terms, HR objectives ensure that a business has:
• The right number of staff
• With the right skills and knowledge
• In the right location
• At the right time
• At a cost the business can afford
Analogy: The Sports Squad
Think of a business like a professional football team. The manager does not just pick eleven random players on match day. They need the right balance of defenders, midfielders, and strikers; players who are fully trained, fit, motivated, and working together towards winning the championship. HR management performs exactly that role for a commercial business.
Key Takeaway: HR objectives bridge the gap between where the business is now with its workforce and where it needs to be to achieve its corporate goals.
2. Common Types of HR Objectives
Businesses set a variety of HR objectives depending on their size, market conditions, and corporate strategy. The most common types include:
a) Matching Workforce Skills and Numbers to Business Needs
This is the core objective of workforce planning. A growing business may set an objective to recruit 50 specialist software developers over the next 12 months, whereas an organisation facing automation might set an objective to redeploy staff to customer service roles.
b) Improving Labour Productivity
Labour productivity measures the output produced per worker over a period of time. An HR objective might be to increase average output per employee by \(5\%\) over the coming year through training or improved working methods.
c) Controlling or Reducing Unit Labour Costs
Labour is often one of the largest costs a business faces. Objectives might focus on holding total employee costs as a manageable percentage of revenue or reducing labour costs per unit of output so the firm remains price-competitive.
d) Improving Employee Engagement and Retention
High staff turnover can be expensive and disruptive. Businesses often set objectives to improve employee retention rates (keeping talented workers) and minimise absenteeism. Happy, loyal staff provide better customer service and produce higher-quality work.
e) Maintaining Positive Employer-Employee Relations
An objective might focus on building strong relationships with employees and their representatives (such as trade unions or staff councils) to avoid industrial disputes and ensure smooth workplace changes.
f) Diversity and Employee Wellbeing
Modern firms frequently establish objectives to ensure fair recruitment, create an inclusive workplace culture representing different backgrounds, and maintain safe, healthy working conditions.
Key Takeaway: Effective HR objectives cover both quantitative targets (such as labour costs and productivity numbers) and qualitative goals (such as employee morale, engagement, and safety).
3. Influences on HR Objectives
HR objectives do not exist in isolation. They are constantly shaped and constrained by factors inside the firm (internal influences) and the wider environment (external influences).
Internal Influences
• Corporate Objectives: The ultimate driver of HR objectives. If the corporate objective is rapid expansion into international markets, HR must recruit multilingual staff and train managers for overseas posts. If the corporate objective is survival during a downturn, HR objectives will focus on cost minimisation and restructuring.
• Financial Resources: A business with limited cash reserves cannot offer generous pay rises, expensive external training programmes, or large hiring budgets.
• Operational Processes: If the operations department invests in advanced machinery or automated assembly lines, HR objectives must focus on retraining staff to operate technical systems or managing workforce downsizing.
• Organisational Culture and Leadership Style: An open, participative culture naturally supports objectives around empowerment and teamwork, whereas an authoritarian leadership approach may focus heavily on strict compliance and cost targets.
External Influences
• Market Conditions & Customer Demand: A sudden surge in consumer demand requires quick recruitment or flexible working hours. Conversely, falling demand may require a freeze on hiring.
• The Labour Market: If there is a shortage of skilled workers in the local economy, HR may have to raise wage offers, offer flexible working, or invest heavily in apprenticeships and internal training.
• Technological Changes: Advances in digital technology change the skills businesses require. Workers who lack digital literacy may need upskilling, while traditional manual roles may be phased out.
• Social and Demographic Trends: An aging population might mean businesses need to retain older, experienced workers longer or adapt working environments to accommodate varied lifestyle demands.
• The Legal and Political Environment: National regulations regarding working hours, minimum wage rates, and workplace health and safety require HR departments to adjust their objectives and policies continuously.
Key Takeaway: When analysing HR objectives in an exam context, always examine both the firm's overall corporate goals (internal) and the market realities it operates within (external).
4. Human Resource Planning (Workforce Planning)
Human resource planning (often called workforce planning) is the continuous process by which a business anticipates its future staffing requirements and designs strategies to satisfy them.
It aims to prevent two major dangers:
1. Labour Shortage: Understaffing leads to missed customer orders, stressed and overworked staff, poor quality, and lost revenue.
2. Labour Surplus: Overstaffing inflates fixed costs, lowers labour productivity, reduces profitability, and creates inefficient, idle workers.
The Step-by-Step HR Planning Process
Step 1: Assessing Current Workforce (The Skills Audit)
The HR department examines its existing workforce. Who works here currently? What qualifications, technical skills, and experience do they possess? What is the age profile of the staff, and who is likely to retire soon?
Step 2: Forecasting Future Workforce Demand
The business estimates how many workers (and with what specific skills) it will need in the future. This forecast depends on:
• Expected sales volume and business growth plans
• Planned changes in operational technology or production methods
• Forecasted staff retirements, resignations, and promotions
Step 3: Forecasting Future Workforce Supply
The business assesses how many workers will actually be available. This involves looking at:
• Internal supply: Staff already working in the business who could be promoted or retrained.
• External supply: People in the local or international labour market available for recruitment.
Step 4: Identifying Labour Gaps and Taking Action
The business compares future demand with future supply:
• If Demand exceeds Supply (Deficit / Shortage): HR takes action by advertising new vacancies, offering competitive pay packages, or retraining existing workers.
• If Supply exceeds Demand (Surplus / Excess): HR takes action by halting new recruitment (natural wastage), offering voluntary early retirement, redeploying workers to growing departments, or initiating redundancies as a last resort.
Memory Trick: Remember the 4-step cycle as A-F-I-A:
Assess current staff \(\rightarrow\) Forecast future demand and supply \(\rightarrow\) Identify gaps \(\rightarrow\) Act (recruit, train, or downsize).
Key Takeaway: HR planning is proactive rather than reactive; it allows a business to prepare for future talent needs before crises emerge.
5. Benefits and Challenges of HR Objectives and Planning
Benefits
• Cost Efficiency: Avoids the financial waste of carrying surplus staff or having to pay emergency overtime rates to cover unexpected shortages.
• Operational Smoothness: Operations and customer service can continue without disruptions because trained staff are always ready when demand rises.
• Improved Employee Morale: When staff see clear training pathways, succession planning, and fair workloads, loyalty and motivation increase.
• Strategic Alignment: Ensures that human capabilities directly support long-term corporate ambitions such as innovation, entering new markets, or delivering premium quality.
Challenges & Limitations
• External Uncertainty: Economic shocks, unexpected competitors, or rapid technological shifts can make workforce forecasts inaccurate very quickly.
• Time and Cost: Conducting thorough skills audits and market research consumes management time and financial resources, which can be challenging for smaller firms.
• Inflexibility: If a business locks itself into rigid multi-year HR plans, it may struggle to react flexibly when market conditions suddenly change.
Key Takeaway: HR plans must remain flexible and regularly reviewed; a rigid plan built on faulty forecasts can lead to costly recruitment or painful redundancies.
6. Common Mistakes to Avoid in Exams
• Confusing HR objectives with corporate objectives: A corporate objective might be "to increase company profit by \(10\%\)". An HR objective that supports this could be "to reduce labour cost per unit by \(3\%\)" or "to improve labour productivity by \(4\%\)". Make sure your HR objectives clearly relate to managing people.
• Forgetting the connection to Operations: HR does not work in a silo. If operations switches to lean production or automated machinery, HR must alter its training and staffing plans immediately.
• Treating HR planning as a one-off event: Workforce planning is an ongoing, dynamic process that must be reviewed regularly as market conditions change.
7. Quick Review Checklist
Before moving on to the next chapter on Human resource data, make sure you can:
\(\checkmark\) Define what an HR objective is and explain why it must align with corporate goals.
\(\checkmark\) Give at least three examples of specific HR objectives (e.g., productivity, retention, cost control).
\(\checkmark\) Distinguish between internal influences (e.g., budget, leadership) and external influences (e.g., labour market, technology) on HR targets.
\(\checkmark\) Explain the stages involved in human resource planning (assessing current staff, forecasting demand/supply, addressing gaps).
\(\checkmark\) Evaluate the advantages and potential difficulties of workforce planning for a business.