New to Revenue-Based HR Planning? Seeking Guidance for a 5-Year Forecast!

Hello,

I have received an assignment to prepare a revenue-based HR Plan for the next 5 years. I need to forecast the number of resources required and address other aspects. I am relatively new to creating revenue-based plans and would appreciate your input and guidance in developing one.

Regards,
Veena

Hi Veena,

This is a relatively new phenomenon for most of our HR professionals in India. If I am not mistaken in your interpretation of revenue-based HR, let me explain my understanding as follows:

Prepare your HR budget for the entire gamut of HR activities in the organization. Work out your last five years' statistics to forecast the next five years based on the business plan.

You have to list out the components of your HR including:
1. Salary & Wages for different grades,
2. Annual Increments
3. Promotions with a rise in salary percentage.
4. Allowances
5. Commission or profit sharing
6. Insurance
7. Other benefits
8. Training & Development
9. Recreational Activities
10. Annual Bonus
11. Other items as per your organization's practices that I am unable to foresee.

You can work out the budget and distribute the annual budget to all listed account heads and accordingly prepare your revenue-based HR plan. Furthermore, you have to see the HR budget in the context of the Company's budget and the overall percentage of the revenue-generating process of your organization.

If you are new, you can seek help from Finance or Accounts experts; they will be helpful in preparing a clear logical picture to justify your case.

Regards,

Sawant

Hi,

I think you should seek clarification from your management regarding the concept. They are not looking at an accountant's view of an HR plan. Nor are they wanting you to present the income and expenses statement of HR activities for the next 5 years.

I think they want you to present a business model for the core activities / KRAs. Your mail is not giving away the business in which you are operating. Assuming that you are a head-hunting organization, I suggest the following should figure in your revenue plan:

- Major accounts you are targeting; their expansion plans; their estimated requirement of manpower; skill sets targeted; whether lower end skills or higher end skills; generic or specialist; what it means to your organization in terms of revenue over a sustained period, i.e., 5 years; To be precise, from which assured sources you are going to be making money and how much.

What resources are required to be committed to generate that kind of revenues; profile and nature of resources. Money outgo to acquire, nurture, grow and retain such resources.

In the end, whether you estimate to make a positive or negative contribution to the bottom line. This revenue plan would give the top management inputs for making critical business decisions:

- for course correction if required, with ref to their perception of the market trends
- for providing additional resources if the market is booming or higher margins are expected from each transaction.
- for making withdrawal plans if the area of business is seen to be making negative contributions.

Hope this helps.

Hi Veena,

I believe that there is a fundamental difference in the principles of revenue generation through Sales or Marketing and revenue-based HR forecasting.

- Revenue generation through business promotion activities is one independent function of Sales and Marketing Strategies. In other words, it is market analysis and market penetration strategies based on presumptions and assumptions.

- Revenue generation through HR resources can be linked to per employee revenue generating ratio purely based on the business performance. In other words, it's postmortem business to reward employees.

Which is of your interest, you have to decide in consultation with the management. From a novice MBA student, you cannot expect market forecasts, which are done by the market analysts with 5 to 10 years of market exposure.

Something is missing.

Warm Regards,
Sawant