Forecasting

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Method & Technique of Forecasting the Demand & Supply of Manpower

Forecasting Demand for EmployeesThis phase of the process involves estimating:

How many employees will be needed

What kinds of employees will be needed

Quantitative tools can help with forecasting, but it involves a great deal of human judgment

The demand for employees is closely tied to the strategic direction that the organization has chosen

Growth

Reengineering

Reorganization

Forecasting Demand for Employees

Techniques to help reduce the uncertainty inherent in HR planning:

Expert estimates Trend projectionsStatistical modelingUnit-demand forecasting

Key to effective planning is accurately and freely sharing information

The Expert Estimate

One or more “experts” provide the organization with demand estimates based on:

ExperienceGuessesIntuitionSubjective assessments of available economic and labor force indicators

This is the least mathematically sophisticated approach

The Expert Estimate

The Delphi technique elicits expert estimates from a number of individuals in an iterative manner

Developed by the Rand CorporationEstimates are revised by each individual based on knowledge of the other individuals’ estimates

With the nominal group technique (NGT), individual estimates are followed by group brainstorming

The goal is to generate a group decision that is preferred over any individual decision

Trend Projection

This top-down technique:

Develops a forecast based on a past relationship between a factor related to employment and employment itself

Example: Sales levels are related to employment needs

Modeling & Multiple-Predictive Techniques

This top-down approach uses the most sophisticated forecasting and modeling techniques

Trend projections relate a single factor, such as sales, to employment Environmental factors could be gross national product or discretionary income Or, the organization may be mathematically modeled so that simulations can be run

Markov chain analysis involves:Developing a matrix to show the probability of an employee’s moving from one position to another or leaving the organization

The process begins with an analysis of staffing levels from one period to another

Markov analysis can identify the probability of lower employee retention

It does not suggest a solution to the problem

Regression analysis is a mathematical procedure:

It predicts the dependent variable on the basis of factors (independent variables)

With simple linear regression, one dependent and one independent variable are studied

With multiple regression, more than one independent variable is studied

Unit Demand Forecasting

This is a bottom-up approachUnit managers analyze current and future needs person-by-person and job-by-job Headquarters totals the unit forecastsThe sum is the corporate employment forecast

If both bottom-up and top-down approaches are used, the forecasts may conflict

This can be resolved by averaging the variances The Delphi technique or NGT could also be used

Analyzing the Current Supply of Employees

This phase of HR planning should answer the question:“How many and what kinds of employees do I

currently have, in terms of the skills and training necessary for the future?”

This involves more than simply counting current employees

The smaller and more centralized the organization, the easier it is to conduct a skills inventory

The Skills Inventory

Both a skills inventory and a management inventory:

Identify the skills, abilities, experiences, and training employees currently haveAre useful for career planning, management development, and related activities

In its simplest form, a skills inventory is a list of:

NamesCharacteristicsSkills

The Skills Inventory

Skills inventories vary greatly in their sophistication

Some are as simple as a file drawer of index cards

Others involve expensive and complex computer databases

Contents of the Skills InventoryThe only data available to the organization for later use is what was designed into the system

Name Employee number

Present location Date of birth

Date of employment Job classification

Skills, knowledge, education Foreign language skill

Professional qualifications Publications

Licenses and patents Hobbies

Supervisory evaluations Salary range

Contents of the Skills Inventory

Often omitted, but increasingly important, are:

Employees’ stated career goalsGeographical preferencesIntended retirement date

The main categories within a skills inventory:

Data summarizing the employee’s past Data summarizing present skills Data that focus on the future

Today, many skills inventories are more complex

Maintaining the Skills Inventory

The two principal methods for gathering data: the interview and the questionnaire

The questionnaire is faster and cheaper, but can be inaccurate Some contend that a trained interviewer can complete questionnaires more quickly and accurately

Plans for keeping files updated must be made

The more often changes are made and the data is used, the more often updates should be performed

Maintaining the Skills Inventory

Should data be stored in a manual system or on a computer?

How much does the computer system cost?How frequently the data will be used?A computer allows comparative analysis over time

Skills inventories are useful only if management uses the data to make significant decisions

Before accessing the data, managers must be trained to avoid abuse of the system

Action Decisions in HR Planning

After the supply of and demand for workers has been analyzed, the two forecasts must be compared

Whenever there is a gap between the two estimates, a course of action must be chosen

If the supply of workers is less than the demand:

It can be filled with present employees who are willing to work overtime

If there is a shortage of skilled employees:

Train and/or promote present employees

Recruit less-skilled employees

Recall employees who were previously laid off

Organizations are using more:Part-time workersSubcontractorsIndependent professionals

This is in response to: Intense global competition Rapid technological change Fears caused by recent workforce reductions

Over 5 million U.S. citizens are contingent workers

Possible solutions to an employee surplus:

AttritionEarly retirementsDemotionsLayoffsTerminations

Employees who are considered surplus are seldom responsible for the conditions leading to the surplus

Most organizations avoid layoffs by using attrition, early retirement, creation of work, and so on

Attrition can be accelerated by encouraging employees to leave early

Drawbacks to losing workers over the age of 50:

They tend to be healthier than younger workersThey have fewer work-related injuriesThey are less likely to change jobsThey take critical skills and experience with them

By 2010, the median age of the U.S. workforce will be 40.6 years

Over half the workforce will be protected by the Age Discrimination in Employment Act

Promises should not be made that can’t be kept

Once promised, it may be illegal to change them

If voluntary reductions don’t eliminate the gap between supply and demand, layoffs may be necessary

Corporations too frequently and quickly turn to layoffsThey fail to consider the consequences About one-third lay off too many workers Poorly designed workforce reductions can kill morale

Human Resource Information Systems

Information is the key to successful HR planning

A human resource information system (HRIS) is an integrated way to acquire, store, analyze, and control information flow through an organization

A highly developed HRIS can increase the efficiency and response times of:

Tracking applicantsSkills inventoryCareer planningEmployee service programs

Computer technology makes it possible to integrate multiple HR needs into a single system:

Enrolling in benefits programsProcessing employee transactions (pay increases)Using learning modules

An HRIS developed for use by upper-level executives is called an executive information system (EISs)

Computerized HRISs have allowed organizations to broaden their view of succession planning

Factors that make succession planning for executive level positions more important than ever:

Large numbers of aging executives Increasingly popular early retirement

Fortune 500 companies anticipate 33 percent turnover among their executives over the next five years

Many companies now realize the critical need for a comprehensive retention plan

This plan may include consulting and part-time assignments

Employee Privacy, Identity Theft, & HRIS

HRIS makes it easier to invade employee privacy

Danger lies both within and outside the organizationThe friendlier the system, the easier it can be for unauthorized access

Identity theft occurs when:Someone uses another’s name, address, social security number, or other information:

Without the person’s knowledgeWith the intent to commit fraud or other crimes

Identity theft is fast becoming a national problem

Complaints from U.S. victims rose from 1,380 in 1999 to over 210,000 in 2003

Identify theft is a felony under the Identity Theft and Assumption Deterrence Act of 1998

The problem will continue to escalate

The costs of identify theft to the employee are numerous:

Average 175 researching and tracking the crime

23 months correcting credit reports

$800 in out-of-pocket expenses to restore financial health and standing

Safeguards to minimize privacy risks in an HRIS:

Determine the best way to collect data Limit the information collected to what is relevant Tell employees what information is kept on file and how it is used Let employees inspect and correct their information Keep sensitive information separateLimit internal use of personal information Only disclose personal information to outsiders with employee consent

Organizations should carefully evaluate their policies regarding access to HRIS data to determine:

How much information, legally and ethically, should be disclosed How much control employees should have over the release of personal information

No federal legislation guarantees employees the right to inspect and amend data in an HRIS

Forecasting

Education