VIVA COLLEGE OF ARTS COMMERCE &SCIENCE

● Project on : Human Resource Management.

● Class : TY.BMS.

● Topics : Cost Effectiveness in

Manpower Planning

• Submitted by: Roll No.

1] Vaibhav Gujjar 10

2] Pratik Jain 14

3] Amruta Khare 16

4] Darshana Mestery 21

5] Prashant Singh 57

Submitted to: prof. Arti Sharma

Signature

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 Index

Sr. no CONTENT Page no

1 3
Introduction
2 Importance of Manpower Planning 3
3 Advantages of Manpower Planning 4
4 Steps in Manpower planning 4
5 Downsizing of Manpower 6
6 Downsizing in Today's Corporate 7
7 Implementation of Downsizing Strategy 10
8 Drawback of Downsizing in India 12
9 Job Retention 14
10 Steps in Budget and Manpower Planning 15

11 Strategic Man Power Planning 17

12 TCS shows door to 500 employees 19
13 P&G plans to reduce their employee by 9600 jobs 20
14 FIAT INDIA has plans to cut workforce by 20% 21
-25%
15 Conclusion 22

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 Introduction
Man power planning in Human Resource Management is a core factor.
Here the penalties for not being correctly staffed are costly. Understaffing
loses the business economies of scale and specialization, orders, customers
and profits. Overstaffing is wasteful and expensive, if sustained, and it is
costly to eliminate because of modern legislation in respect of redundancy
payments, consultation, minimum periods of notice, etc. Very importantly,
overstaffing reduces the competitive efficiency of the business. . Effective
human resources planning give optimal productivity in terms of timelines
and quality of deliverables." It will not only improve people competency,
but will also ensure that people grow with the company.

Importance of Manpower Planning:

Planning is nothing but using the available assets for the effective
implementation of the production plans. After the preparing the plans,
people are grouped together to achieve organizational objectives.
Planning is concerned with coordinating, motivating and controlling of the
various activities within the organization. Time required for acquiring the
material, capital and machinery should be taken into account. Manager has
to reasonably predict future events and plan out the production. The basic
purpose of the management is to increase the production, so that the profit
margin can be increased. Manager has to guess the future business and to
take timely and correct decisions in respect of company objectives, policies
and cost performances. The plans need to be supported by all the members
of the organization. Planning is making a decision in advance what is to be
done. It is the willpower of course of action to achieve the desired results. It
is a kind of future picture where events are sketched. It can be defined as a
mental process requiring the use of intellectual faculty, imagination,
foresight and sound judgment. It involves problem solving and decision
making. Management has to prepare for short term strategy and measure the
achievements, while the long term plans are prepared to develop the better
and new products, services, expansion to keep the interest of the owners

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 Advantages of Manpower Planning:
Manpower planning ensures optimum use of available human resources.

1. It is useful both for organization and nation.

2. It generates facilities to educate people in the organization.
3. It brings about fast economic developments.
4. It boosts the geographical mobility of labor.
5. It provides smooth working even after expansion of the organization.
6. It opens possibility for workers for future promotions, thus providing
incentive.
7. It creates healthy atmosphere of encouragement and motivation in the
organization.
8. Training becomes effective.
9. It provides help for career development of the employees.

Steps in Manpower planning

1. Predict manpower plans
2. Design job description and the job requirements
3. Find adequate sources of recruitment.
4. Give boost to youngsters by appointment to higher posts.
5. Best motivation for internal promotion.
6. Look after the expected losses due to retirement, transfer and other issues.

7. See for replacement due to accident, death, dismissals and promotion.

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 Factors which affect the efficiency of labor:

Inheritance: Persons from good collection are bound to work

professionally. The quality and rate of physical as well as mental
development, which is dissimilar in case of different individuals is the
result of genetic differences.

Climate: Climatic location has a definite effect on the efficiency of the

workers.

Health of worker: worker’s physical condition plays a very important

part in performing the work. Good health means the sound mind, in the
sound body.

General and technical education: education provides a definite impact

n the working ability and efficiency of the worker.

Personal qualities: persons with dissimilar personal qualities bound to

have definite differences in their behavior and methods of working. The
personal qualities influence the quality of work.

Wages: proper wages guarantees certain reasons in standard of living,

such as cheerfulness, discipline etc. and keep workers satisfy. This
provides incentive to work.

Hours of work: long and tiring hours of work exercise have bad effect
on the competence of the workers

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 Downsizing of Manpower:
Downsizing plan

Where there is surplus workforce, trimming of labor force will be necessary.

The trimming or downsizing plan shall be indicate

1. Who is to be made redundant and where and when
2. plans for redevelopment or retraining where these has not been covered in
the redevelopment plan
3. Steps to be taken to help redundant employees find new jobs
4. Policy for declaring redundancies and making redundancy payments
5. Programs for consulting with unions or staff associations and informing
those effected

Another method of dealing with surplus labor is to retain all employees

but reduce the work hour, perhaps to a four day, 32 hours work with .In this
way the company can spread a 20% decrease in demand equitably across the
whole workforce, rather than keep 80% of the employees full time and lay
off 20% of them .
Depending on the nature of the surplus, a firm may be able to transfer
or reassign employees to jobs in parts of the organization that are still
experiencing demand. Or if the form expects the surplus to be short live and
can afford to keep excess workforce on the pay role, the company can use
the slack time to provide cross training in related jobs to enhance workforce
skills and flexibility. Alternatively, the surplus workers can perform
equipment maintenance overhaul and engage themselves in other activities
that where postpone when demand was high.
Offering incentives for the early retirement is another way of handling
surplus labor euphemistically called as voluntary retirement scheme , these
method is widely practiced .but H.R planners and Trainers may be forced to
scramble to deal with a sudden short fall of experienced staff, particularly
when VRS is accepted by a large number of employees.
Laying off is another strategy for dealing with surplus staff. These
action detrimental to both employees and employers, for employees lay-off
means joblessness and for employees, it means loss of reputation
notwithstanding this, several firms are laying off their surplus employees.

Downsizing in Today's Corporate

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The major concern for managers in the organizations these days is the
effective utilization of work force. The issue has become increasingly
important because of the pressure to reduce the labor costs. The issue deals
with the shortage as well as surplus of employees in an organization. Where
there is surplus of work force, trimming of manpower becomes necessary.
Downsizing is opted by most of the organizations in an effort to right size
their human resources. Downsizing literally means to reduce the size of the
organization by cutting down the number of employees presently working in
the company. Downsizing strategies enable a company to rightsize its
manpower. The unproductive workers should be eliminated while retaining
the most effective personnel, thereby optimizing the performance of the
workforce.

Downsizings were clearly regrettable but understandable as they helped

firms survive during recession period. Such a large number of workers were
certainly unnecessary for a firm doing a smaller volume of sales, so the
workers were released over short intervals of time in large numbers.
Downsizing involves several implications for the short-term profitability and
even the long-term growth of the company. It is a decision on the part of the
Management to reduce the overall workforce.

The reasons that force the company to opt for downsizing may be any of the
following

1) Intense competition

One of the reasons for the companies to downsize their manpower may be
seen as the intense competition that cuts into the company's revenues. Lower
revenues lead to efforts to quickly cut down the costs and some employees
are laid off as a result. The Management of a company adopts downsizing
strategy when less work is done by more number of employees and the
potential of employees is not utilized to the full extent.

2) Technology advancement

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The factors that lead to downsizing are the developments in the technology,
automation and outsourcing one or more processes in an organization. The
technological change has been a catalyst to an expanded view of work in
many companies. Technological advances have allowed for the expansion of
many jobs by combining multiple functions into a single operation. Workers
are presented with a broadened scope of activities that challenge their skills.
The employees who are ready to adapt to the changes in the environment
and as a result, in the organization culture and who moulds themselves
according to the environmental requirements should be retained. As the
technology advances, the skills of the employees become obsolete. Skill
obsolescence can be eliminated or at least minimized so that experienced
employees are retained.

3) Automation

Automation or the replacement of man by machine also is one of the major

reasons behind downsizing. The work done by a group of people, say 5 or 6
workers is done by a machine, which can be operated by a single person.
Thus this has initiated the need to reduce the number of employees in the
organization. Companies have opted for downsizing its manpower following
the computerization and automation of several operations.

4) Outsourcing

Outsourcing a department or a particular process is another reason that

forces companies to conduct layoffs in an effort to downsize its human
resources. In an organization where an entire department or a particular
process is outsourced by an agency, the employees who belong to that
particular department or those who are involved in the operations of that
particular process are laid off. Consider that an organization has offered its
recruitment and selection to an outsourcing agency; the employees involved
in it are to be laid off.

5) Strategic alliances

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Another reason is the strategic alliance of two or more companies. The joint
venture necessitates the downsizing of the manpower in the companies
involved in the venture. The term downsizing was coined to describe the
action of dismissing a large portion of a firm's workforce in a very short
period of time, particularly when the firm was highly profitable. In a
standard downsizing story, a profitable firm well poised for growth would
announce that it was firing a large percentage of its workforce. The equity
market would get excited and initiate a buying frenzy of the firm's stock.
This goes counter to a standard micro-economic analysis, in which weak
firm anticipate a slump in the demand for its products, and lays off workers,
while strong firm foresees a jump in the demand for its products, and hires
more workers to increase production.

6) Elimination of costs

Investors care about downsizing, since it contains severe implications for the
short-term profitability and even the long-term growth of a company.
Downsizing is quite unlike a traditional layoff- in a layoff, a worker is asked
to temporarily leave during periods of weak demand. In downsizing, the
separation between a worker and a firm is permanent. Downsizing is not a
dismissal for individual incompetence but rather a decision on the part of the
Management to reduce the overall workforce.

7) Improve profitability

The other reasons being intended to improve profitability eliminate obsolete

functions and reduce the overstaffed areas of an organization. As the
organizations move towards more strategic workforce management,
downsizing will remain part of the work force landscape, but the catalyst for
it will change. Downsizing began as the strategy of sick companies shedding
workers in the face of weak demand, but soon strong firms looking to boost
shareholder value also adopted the policy. Downsizing can be used as a
strategic option that Management can exercise in order to boost the equity
value. It can be perceived as a planned change involving the elimination of
the positions, operations or jobs. To quote an example, the position of
secretaries to executives in the organizations have been replaced by the
computers thereby reducing the number of employees which leads to
reduction in the labor costs.

Implementation of Downsizing Strategy

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The implementation of downsizing strategy should be carefully planned and
performed by the organizations. To begin with, a clear and careful analysis
of the effects of the layoffs in the long run as well as in the short run is to be
carried out. If a company performs layoffs in response to the short-term
losses, its long-term survivability may be endangered. Thus before
conducting layoffs, the companies should seek an appropriate balance
between short-term and long-term demands. The companies should be well
prepared for downsizing. Anticipating the kinds of human resource
problems that crop up subsequently, help the companies to cope up with this
change to some extent.

The employees should be informed well in advance about the layoffs. Prior
warning or informing about the layoffs creates a chance for the employees to
revolt against the Management, cause damage or sabotage to the machinery
and valuable assets of the company. This impact can be reduced by
providing the employees with retraining and offering them adequate
compensation and benefits.

The major techniques of adopting downsizing strategy are listed below:

1) Layoff

Layoff is a temporary measure to reduce the workforce in case the

organization faces problems like shortage of fuel or power, accumulation of
raw material and finished stock due to recession, shortage of working
capital, breakdown of machinery or natural calamity. Layoffs were declared
illegal by the Labor Department. Hindustan Motors, one of the key players
in the automobiles, in the recent past entered into a legal course against the
order of refusal of permission of layoffs. Another US-based company Texas
Instruments adopted a different strategy to cope up with a recession. It
terminated the jobs of thousands of employees and had to rehire, retrain and
motivate the employees when things improved.

2) Retrenchment

Under the Industrial Dispute Act, 1947, an organization can retrench

employees for any reason other than termination of employment due to
disciplinary action. The employees can prune the workforce using this
method and pay them the retrenchment compensation as stipulated in the
Act. Retrenchment should be often based on the Last In First Out (LIFO)

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principle wherein junior-most employees would be retrenched, even if they
were competent. Retrenchment involves a tricky and complex a process for
identifying the non-performers, who are required to be separated from the
organization permanently.

A thorough performance appraisal is to be carried out in order to identify the

non-performers and remove them thereby enhancing the profitability as well
as productivity. Performance appraisal system should be well designed so as
to identify the most efficient employees so that they can be retained while
conducting the layoffs. Companies must be aware that even their short-term
problems may not be solved by downsizing because of the loss of skills
resulting from the departure of the experienced employees who were offered
Early Retirement Schemes and VRS.

3) Closure

An employer can close down the whole or part of a unit if the circumstances
that lead to closure are beyond the control of the employer. In the case of
closure on account of unavoidable circumstances beyond the control of
employer, the maximum compensation payable to a worker is his three
months salary.

4) Voluntary retirement

Companies have been downsizing through the process of a compensation

package based on Voluntary Retirement Scheme or VRS. VRS is viewed as
one of the methods for the turnaround of the company when business cycle
is on a declining curve. In many large sized organizations, there is no more
lifetime employment. The symptoms of such decline in the business cycle
are seen in gradual decline in profits, reduction of market shares, loss of
monopoly, fast emergence of new technology and the like. When these
symptoms are round the corner, Management must initiate action thorough
strategic planning.

Drawback of Downsizing in India

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One of the most important drawbacks of these methods of downsizing is that
they cannot be used at the discretion of the employer in case of large
organizations. Approval of government before layoff, retrenchment and
closure is compulsory. In a country like India, where unemployment is one
of the major problems, the government is very reluctant to give permission
for cutting jobs even if the reasons are genuine. Trade unions also offer stiff
resistance.

Having identified the reasons for the present downtrend of the organization
and also having decided the probable actions required for the rectification,
the company must compare its vital data for all the factors with the best
company in the same or similar trade. Such benchmarking helps in
understanding the level of efficiency at which the company is presently
working. After implementing one of the downsizing methods and reducing
the manpower, the main issue for the Management is to handle the survivors
or the employees who remained in the company after downsizing.

 It is important to maintain the morale of the retained staff.

 It is therefore necessary to maintain close communication with them
and dispel rumors, which are generally rampant in such conditions.
 Efforts should be made to build a good deal of counseling services.
Counseling should be used as a process to communicate effectively
with the organizational members
 The retained employees shall also need advice not only on investment
but also on income-tax implications.
 Create an healthy environment so that the employee will not tend to
develop a sense of job insecurity and search for job offers outside.

The companies can reduce the impact of downsizing by retraining or

redeployment policies. These help employees to acquire more than one skill.
Also potential employees should be involved in planning the downsizing
process thereby creating awareness among the employees that downsizing is
inevitable in that particular situation facing the organization. Providing good
and attractive compensations and severance packages can soften the impact
of downsizing.

Downsizing is also aimed at increasing profitability by reducing the costs as

well as enhancing and improving the productivity of the retained employees.
But the fear arises here that the performance of the retained employees
might be reduced because of the job stress they experience due to the

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additional workload on them. In fact there is a danger of productivity level
going down. In order to ensure that performance level of the survivors do
not go down, they should be motivated and made to feel that the
organization needs them and values them.

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 Job Retention
Another method of dealing with surplus labor is to retain all employees but
reduce the work hour, perhaps to a four day, 32 hours work.

the workforce development world, the term "retention" typically refers to

the amount of time a worker stays on a job. Sometimes it refers to the
amount of time someone stays in the labor market, even if he or she has
moved from one job to another. Long-term job retention results in a steady
income and fewer disruptions to a worker's daily life. Steady work can also
demonstrate to an employer that the person is capable of maintaining a work
schedule and is reliable; therefore, retention can sometimes lead to greater
job opportunities and can result in job promotions.

Research shows that most people who have barriers to steady work lose their
jobs in the first three months. Of course, this may be true of ex-offenders as
well. Fortunately, several strategies can help increase your clients’ job
retention potential.

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 Steps in Budget and Manpower Planning
Seven major phases involved in planning, are as follows:

1. Identification

↓
2. Formulation and control

↓
3. Appraisal and selection

↓
4. Negotiations

↓
5. Implementation

↓
6. Monitoring

↓
7. Evaluation

Policy, programme or project monitoring and evaluation activities feed

information into new designs, generating potentials for improvement in
formulation, implementation and impact. In practice, however, courses of
action identified often proceed little further than the formulation stage. If
implemented, they are rarely monitored or evaluated. Feedback relevant to
the design of new projects, programmes or policies is therefore either scant
or non-existent and reports on causes of "success" or "failure" tend to be
vague.

It is at the formulation stage and during monitoring that an understanding of

the principles of budget and manpower planning becomes critical. Poor
formulation and/or monitoring of budget and manpower needs can, for
example, result in the following problems:

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 The rejection of projects, programmes or policies because of over-stated
budget and manpower requirements at the formulation stage.

 Non- or incomplete implementation of projects due to understated costs

and manpower needs, leading to chronic shortages of human and physical
resources.

 A tendency for personnel costs to rise with time, "squeezing out" other
important project cost items and preventing effective implementation.

The need for careful budget and manpower planning is, therefore, crucial to
the success of any project, programme or policy.

Strategic Man Power Planning

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The strategic manpower planning system recognizes that people display
varying degrees of talent and leadership potential and that, for every
organization, there is an optimal mix of leaders and followers that best
served its business objectives. For some organizations, the division of talents
could be even more refined; for instance, a further distinction could be made
between a leader of leaders and a leader of followers. Regardless of the
number of talent categories, the important point is that the careers of people
from different talent pools would progress at different pace and terminating
at different levels of competency. In short, the strategic manpower planning
system explicitly captures the different talent pools that exist in an
organization and determines the most appropriate sets of personnel policies
to groom and retain the right mix of people to achieve the business goals.

While strategic planning system helps the HR managers to devise

organizational wide personnel policies, the tactical planning system
addresses the peculiarities and specific career needs of professions within
the organization. As such, the key output of tactical model is a career plan
that systematically grooms the right number of individuals to hold the
various jobs. The career plan will spell out the sequence of jobs to assume
and the trainings to attend so that the individuals going through the pace will
gain the necessary exposure and experience to discharge the duties
professionally.

Finally, the operational planning system assists the HR managers to

formulate optimal personnel posting/deployment plan for the employees.
With the exceptions of very small companies, where job changes (promotion
or lateral move) are generally opportunistic in nature, most companies
(especially the more structured institutions like the Armed Forces) can
orchestrate job changes to ensure that both the individuals? Aspirations and
the organization’s objectives (as represented by the strategic and tactical

In a nutshell, the suite of HRM planning systems produces results that are

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mutually consistent so that the employees would receive clear and
unambiguous career recommendations.

How To Implement Strategic Workforce Planning

1. Build on previous successes, such as succession planning, or try a pilot

program in a specific business unit.
2. Seek functional partners within the company, for example, HR
collaborating with finance or IT.
3. Establish definitive and consistent data.
4. Create a common language to describe competencies, jobs and other
workforce data.
5. Regularly update skills and competency data.
6. Adapt workforce planning to different needs and dynamics.
7. Make the process and tools simple and user-friendly.
8. Develop HR's capabilities to make it an effective partner.
9. Focus on the most critical, high-impact jobs and talent
10.Use strategic workforce planning to leverage internal talent.
11.Integrate strategic workforce planning with business planning.
12.Hold business units accountable.

TCS shows door to 500 employees

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The largest software exporter TCS said about 500 members of its staff have
“voluntarily resigned” after an annual performance check.

“Employees with experience of two years and above across the company
who were unable to meet performance requirements have been asked to look
for other jobs commensurate with their abilities”.

“This is not an exceptional thing, it happens every year and it’s part of our
annual performance exercise. In TCS, everyone has to go through an
appraisal cycle where they are rated between 1-5 depending on their
performance. If in one appraisal cycle anyone is rated below 2, we put them
on PIP (performance improvement plan). Under this they are given extra
training. Even after this if their rating is below 2, then they are asked to look
for other jobs,”

P&G plans to reduce their employee by 9600 jobs

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P&G plans to cut 9% of its workforce
The consumer products group Procter & Gamble plans to cut 9,600 jobs
worldwide.

The company has been struggling with rising costs and slow sales growth
for the past two years.

Sales increased just over 4% in fiscal 2000 and fell 4% in the first six
months of fiscal 2001.

P&G makes Crest toothpaste, Tide detergent and Pampers nappies.

The 9,600 cuts within a workforce of 110,000 amounts to 9% of the

company's employees.

US jobs under threat

About 40% of the job losses will be in the US.

One-third of the cuts will come from manufacturing projects. This will also
involve plant closures.

The remaining two-thirds of the reductions will affect non-manufacturing

positions at all levels.

The job cuts extend a previous cost-cutting programme from 1999 called
"Organization 2005", which involved 15,000 job losses.

The company still had 7,800 jobs to cut under that programme. With this the
total job losses will be about 17,400.

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 FIAT INDIA has plans to cut workforce by 20% -25%

Fiat India is considering a plan to reduce its workforce by around 20-25 per
cent soon. The company will soon launch a voluntary retirement scheme to
trim excess workforce at its Kurla facility reports in Mumbai

The company’s decision to reduce manpower which has become necessary

given the dwindling sales volumes of Fiat India. Fiat India, which
manufactures the Uno, Siena and the recently launched Siena Weekend, now
has 2,030 workers. In October ’98 the company had reduced its workforce
by 1,050 through a similar VRS. Fiat has surplus staff, and hence is planning
a fresh VRS.

“It is a part of the company restructuring plan to trim excess workforce.

Until the scheme is finalized, it would be difficult to quantify the possible
reduction in manpower,

Sales of its small car Uno have shrunk to an average 600 units per month
this year, approximately one third of the monthly sales in ’99. The Uno’s
sales volumes have fallen behind others in the compact segment, with
Hyundai Santro, Daewoo Matiz, Maruti Zen and Tata Indica moving up the
sales charts

The Siena, Fiat’s mid-size offering, has also been slipping in volumes with
Fiat India selling around 150 units per month, as against 450-500 units in
’99. Sales of the Siena Weekend, the Station wagon version of the mid-size
car, have also not picked up

The restructuring is already evident. The local arm of the Italian auto major
is believed to have recently asked around 70 officials at the middle-to-lower
management levels to ‘discontinue’ their services with effect from January
01.

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 Conclusion
Many organizations have been downsizing their manpower over the years
for the cost effectiveness on the manpower planning. It is just not sufficient
to plan downsizing well but the coping strategies should also be designed
properly to handle the implementation of downsizing. Over the past decade,
downsizing has been in full swing and reductions in the workforce became a
fact of life in the world of work. The downsizing strategies adopted by many
Indian companies recently, support the above statement:

* The downsizing strategy of AIR INDIA was to cut almost 1000 jobs by
launching VRS.

* As a part of its downsizing strategy, Bajaj Auto will reduce its work force
by 4000 by the end of 2003.

* Downsizing was planned at MTNL, Mahanagar Telephone Nigam (Public

Sector Telecom Major) in order to enhance productivity. Over 10,000
employees are eligible to opt for the scheme announced. This is the largest
VRS announced by a Public Sector company.

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