Planning human resource requirements to meet target customer service levels

Purpose – Effective human resource planning allows management to recruit, develop and deploy the right people at the right place at the right time, to meet organizational internal and external service level commitments. Firms are constantly looking out for strategies to cope with skill shortages that are particularly acute in the “knowledge intense” industries due to high staff turnover. The purpose of this paper is to describe how system dynamics modeling allows management to plan to hire and develop right level of skills and competencies in the organizational inventory to meet desired service level targets. Design/methodology/approach – An integrated system dynamics framework is used to develop various feedbacks and feed forward paths in the context of competence planning and development. The model is mapped onto an overseas process industry company's recruitment and attrition situations and tested using real data. Findings – Strategies for human resource planning are developed by conducting time‐based dynamic analysis. Optimum design guidelines are provided to reduce the unwanted scenario of competence surplus and/or shortage, and therefore, to reduce disparity in between service level needs and availability of right competencies. Research limitations/implications – System dynamics type of modeling is usually suited for medium to long range timescale (two to five years scenarios). There is a need for the model to be tested in a high turnover industry such as IT to test its efficacy in short‐term time scale, where shortage in required talent is more acute. Also this model is tested for measuring the generic skill‐sets in here. There is a need to test the model for a mixture of generic and specialized skills‐set in a specific business operation. Practical implications – The authors anticipate that system dynamics modeling would help the decision makers and HR professionals to devise medium to long‐term human resource planning strategies to anticipate and meet the service level expectations from the internal and external customers. Social implications – Such planning exercise will avoid the situation of customer dissatisfaction due to right competence shortages. Also this will reduce the staff surplus scenario that usually leads to knee‐jerk reaction to lay‐off unwanted skills, which is usually a costly exercise and impacts negatively on staff morale. Originality/value – Use of the systems dynamics model introduced here is a novel way to analyze human resource planning function to meet the target service level demands. The idea that an organization can estimate the service level requirements for medium to long‐term situations, and conduct what‐if scenarios in a dynamic sense, can provide valuable information in strategic planning purposes.