Forecasting HR Demand

•The process of estimating how many people will be needed in various job categories, geographical locations and organizational units. •Also known as ‘Demand Forecasting’ it is more of an ‘Art’ than a ‘Science’.• A driving force in HR Planning.

• Ward (1996) says that traditional methods employed by HR depts. are found to be sources of dissatisfaction.

• No doubt, forecasting avoids many future complications on the HR front if it is taken up on a pro-active format.

• Growing companies always rely on progressive methods of forecasting with a long-term vision. (Eg. recruitments throughout the year)

• Continuous recruitments is a sign of company’s Growth Vision and Sound Performance on business front.

• It hardly takes into account the Recruitment Cost factor keeping in line with progressive spirit reflected in the value statement of the firm.

Why Demand Forecasting?

• It helps to quantify the positions necessary for producing a given number of goods or offering a given amount of services in demand.

• To identify departments or work groups that can benefit from productivity improvement efforts.

• Determine what staff mix is desirable in the future (numbers of people/positions of once class or occupational group relative to others)

• Assess appropriate staffing levels in different parts of organization so as to hold down unnecessary costs.

(cutting down unproductive expenditure) also known as rationalization of expenditure.

• To prevent shortage of people where and when they are most needed.

• Monitor compliance with equal employment opportunity goals.

• Helps in controlling HR costs in the areas like recruitment, management, promotions/transfers keeping in line with firm’s needs in change perspective.

Causes for HR Demand

• Changes in external environment (economic, technological, social, demographic factors exert influence on work performed by the organization, ie., labor demand is affected)

• Organizational plans and objectives How do strategists want the organization to perform? At what level of output do they plan to produce goods or

offer services?These questions point out the fact that staffing is linked to

output levels by means of predictor.

• Productivity levels How much is each worker producing? Labor demand

remains constant or even decreases when each worker increases output.

Eg: Extra stay hours and weekends working also come into this category.

Forecasting Methods

• Quantitative/Descriptive• Quantitative/Normative• Qualitative/Descriptive• Qualitative/Normative

Quantitative/Descriptive methods:• They focus on estimating how many people will be needed

in the future in various job categories.• To describe what will probably be..• Methods include: • Summary Statistics, • moving averages, • exponential smoothing, • trend projections, • regression models, • flow models.

Summary statistics is the most simplest method.• Past personnel movements are tracked on the basis of

movement: 1) into the organization (what kind of people are being

hired? How many will probably be hired?; 2) through the organization (How many people are moving

to lateral positions? Higher-level/Lower level ones? 3) Out of organization (how much movement out of the

firm occurs through turnover, retirements, firings, death etc.

• Moving Average implies the average data about HR demand from recent periods and projects them into the future.

• Average number of people required over the past 3,6,12 months is divided by the number of months in the forecast to compute a single mean.

• Advantage is its simplicity. • Drawback is heavy reliance on past rather than future data.

Exponential smoothing is more sophisticated method.• Forecast to the current period is added to an error term, computed

by multiplying forecast error during the present period by a constant between one and zero.

Trend Projections• Forecasters plot past demand for HR on a graph.• No of people hired or requested are placed on one axis. • Time is placed on other axis. • Forecasters simply eyeball the data and plot a straight line from past

to future. • Trend projections are easily explained to strategists and easily

prepared by HR planners.

Regression Models are more mathematically precise.

• A line is fitted on a graph much like that in trend projection, except a mathematical regression formula is used to relate ‘staffing’ and ‘output’ variables.

Flow Models are frequently used for forecasting.

• Markov Model is one among them. • It makes sense to decision makers.

Quantitative Normative:• They optimize numbers of people and positions. • Their purpose is to assess what should be in future, not what

will probably be. • Specific methods include Linear Programming, goal

programming and assignment models.

Linear Programming (LP) is applicable to whole range of techniques. It is appropriate to use when:

• Managers seek a single, well-defined objective. • Alternatives for action exist. • Achievement of objective is constrained by scarce resources.• Objectives and constraints are expressed as mathematical functions (linear

inequalities). • A linear relationship exists between the objective and constraints on

achieving it. • It assesses the required staffing level that matches required output levels.

Goal Programming (GP)is the related method, pairing Linear programming and Markow modeling.

• When constraints such as ‘budget’ and ‘promotion’ policies influence staffing and when the forecasting problem encompasses several time periods, this method is appropriate.

• Pinpoints attainable and optimal goals by comparing discrepancies between ‘targets’ and forecasted ‘results’.

• It has been used in business firms, govt. organizations.

Assignment Models match individuals to job vacancies.

• They focus on individuals rather than groups distinguishes them from such other methods as linear and goal programming.

• Individuals are matched to positions on the basis of career aspirations or tenure in existing jobs.

• Aim is to achieve great ‘precision’ in examining the use of talent and pinpointing shortages and surpluses.

• Chief advantage of methods like LP and GP and Assignment Models is that they establish norms and yardsticks for HR forecasts.

• Facilitate control of HR, helping hold down costs.

• Unfortunately, they require sophisticated mathematics.

Qualitative Descriptive methods focus on what is expected in the future? Not necessarily what is desired.

• They do not rely on mathematics. • Specific methods include simple judgments by managers, the

critical incidents approach, Delphi Technique, nominal group techniques, cross-impact analysis.

• These methods identify what factors inside and outside an organization will influence jobs, people and the HR department in future.

• Predict how these factors will influence jobs, people, and HR department.

• They are also applicable for environmental scanning.

Qualitative Normative are directed at what should be in the future.

• They forecast according to the manager’s desires in line with strategic business plan, not mere expectations.

• Numbers of people and positions are assessed without mathematics.

• Methods used in qualitative/descriptive forecasting are also used here to determine:

What ought to be, not just what will probably be.

Limitations

Many of these methods hardly find application in contemporary scenario.

• Managers are sometimes skeptical of quantitative forecasts.

• Problems that confront organizations do change, rendering reliance on specific forecasting approaches inappropriate.

• Not all HR planners possess appropriate skills to apply all forecasting methods.

:HR PLANNING IS IMPORTANT BECAUSE IT PROVIDES

THE BASE PLATFORM FOR DEVELOPING:

• Recruitment/ Selection PLAN-Induction / Orientation PLAN-Training / Development PLAN-Compensation PLANSalary administration PLAN-Payroll Administration PLAN-Performance Appraisal PLAN-Performance Management PLAN-Industrial Relations PLAN-Promotions PLAN [ IF ANY ]-Terminations PLAN

• Transfers PLAN-Staff amenities PLAN-retraining plan-early retirement plan-redundancy plan-changes in workforce utilization plan-career path plan-succession plan.-personnel and career plans.