There is one old saying that says that people decide all business. People produce goods, services, people engaged in trade and manage. That is why one of the main objectives in the business plan is the staff planning of the project, which is part of the organizational plan and management plan. Let’s focuses on planning of the management structure, number of employees and labor costs in today’s article.
The first step in planning of the project personnel is a planning of management structure and selection of top-managers.
The management structure of the project is a structure of management and functional units, as well as the basic principles of their interaction with each other.
There are several principles of the management structure of the project. The main of these principles is territorial and functional, which are often combined.
- The territorial principle of management structure involves the construction of such a structure, depending on the spatial distribution of individual segments of the project. The territorial principle applies where the project is located in several different countries or regions. There is its own control system in each territorial segment of the territorial structure.
- The functional principle provides that structural elements are grouped not by their spatial location, but on their functions. For example the structure of the production plant may provide a functional separation of the functions of production, transportation and so on.
Territorial structure requires a functional structure within separate territorial units in most cases. Therefore, we consider the functional structure in more detail.
We have to identify the main functional elements of the project and thereby create a management structure when preparing a business plan. For most industrial projects can approach such a functional management structure:
- Top management – managers who provides overall project management or managing multiple functional units.
- Production Department. The functions of this department should treat the direct production of products.
- Quality Control Department – should ensure quality control of raw materials used and the quality of manufactured products.
- Supply department. The functions of this department should treat the supply of the necessary raw materials, energy, spares and other. The structure of this department can be included repair department.
- Marketing and Sales Department. This department should conduct market studies, determine the level of prices and provide a direct realization of finished products.
- Finance Department – should provide financial and managerial accounting of all transactions and implement financial management.
- Personnel Department – must ensure selection of employees, time tracking and compliance with labor laws.
- Legal Department – should provide the legal activities of the project, including the conclusion of contracts.
Any additional departments can be created depending on the specifics of each project. The functions of the various departments can be associated in some cases. For example production department may associate it functions with quality control department or the sales department with supply department. On large projects functions of individual departments can be distributed.
We can plan the necessary number of employees after defining of the project structure. This number should be planned for each separate element of management structure.
The number of top-management planned based on the scope of the project and its structure. In most cases it must be one top manager. If the project will involve more than 100 people structure should include managers who will manage separate functional areas. Also it should be noted that each functional structural units should include at least one administrative position.
Number of employees of the production department can be calculate based on expected production plan, as well as norms of output per employee and normal working hours per employee.
For example, we plan to produce per year 120,000 units of goods or 10,000 units per month.
Rate of output per worker is 2 units for 1 hour.
Normal working hours per employee is 160 hours per month.
So in order to produce the required amount of product we need to have:
10 000 (2 x 160) = 32 employee.
Number of employees of financial, legal, marketing, supply, personnel and quality control departments can be planned based on the number of employees in the production department. We can also apply the method of planning the number of these departments based on the number of operations that need to be made to its employees, the average duration of these operations and normal working hours of the employee.
Returning to the previous example. We plan to produce 10,000 products per month. For the production of one unit we should use 2 types of raw materials. Employee of quality control department should take 2 samples of raw materials, waste of time for 1 sample – 0.1 hours. Normal working time employee is 160 hours per month.
So for production of 10000 units, we need to involve:
10000 x 2 x 0.1 / 160 = 12.5 or 13 employees of quality control department.
After determining of the number of employees we should plan expected wage and social costs. We have to install wages for each standard employee units and in general for all employees for the planning of general wage and social cost. We can do this by using the table below:
Organizational staffing plan
|Number||Subdivisions / Permanent Position||Number of employees||Monthly salary per employee||Total salary of subdivision (column 3 х 4)|
|1.||Top management, total ( 1.1.+1.2.+ …)|
|2.||Production Department (2.1.+2.2.+…)|
|3.||Quality Control Department ( 3.1.+3.2.+ …)|
|4.||Supply Department ( 4.1.+4.2.+ …)|
|5.||Marketing and Sales Department ( 5.1.+5.2.+ …)|
|6.||Financial Department ( 6.1.+6.2.+ …)|
|7.||Staff department ( 7.1.+7.2.+ …)|
( 8.1.+8.2.+ …)
|9.||Total (1. + 2. + 3. + 4. + 5. + 6. + 7. + 8.)|
This table is the staff schedule in fact. The staff schedule approved by investors or project manager determines the total number of employees within a defined structure. Also staff schedule determines the amount of labor costs of employees per month or per year.
There are taxes on social events in most countries. We need to plan costs for social events after we have planned expected labor costs. We can do this by multiplying the estimated amount of labor costs by the percentage of social taxes.
This post describes only the basic principles of planning of management structure, staff planning, planning of labor and social costs. In drawing up a specific business plan we must take into account the specifics of each individual project.