Forecasting techniques for estimating future human needs and shortcomings of these

techniques:

Human Resource is undoubtedly an important part of any organization. Hence, every organization must
have the right number of the workforce at the right place and that too at the right time. In order to
efficiently plan the workforce, the proper needs of human resource are very necessary. Human resource
(HR) demand forecasting is the process of estimating the future quantity and quality of people required.
HR Forecasting techniques vary from simple to sophisticated ones. Before describing each technique, it
may be stated that organizations generally follow more than one technique. The techniques are:

1. Expert forecasts

2. Trend projection forecasts

3. Other forecasting methods

1. Expert forecasts

This technique is very simple. In this managers sit together, discuses and arrive at a figure which would
be the future demand for labor. The technique may involve a “bottom-up” or a “top-down” approach. In
the first, line managers submit their department proposals to top managers who arrive at the company
forecasts. These forecasts are reviewed with departmental heads and agreed upon. Neither of these
approaches is accurate- a combination of the two could yield positive results. In the “bottom-up” and
“top-down” approaches, departmental managers can prepare forecasts for their respective departments.
Simultaneously, top HR managers prepare company forecasts. A committee comprising departmental
mangers and HR managers will review the two sets of forecasts. In large organizations, the simplest
method to learn about managers’ need is to survey those managers who are the ultimate expert’s in the
future staffing needs of their departments.

Survey techniques may be Informal & instant decisions (casual estimates, informal pool), Formal expert
survey (a written questionnaire), Nominal group technique or Delphi technique.

Nominal group technique- Nominal group technique (NGT) is defined as a structured method
for group brainstorming that encourages contributions from everyone and facilitates quick
agreement on the relative importance of issues, problems, or solutions.

For example, a five-man shift quality group at a coal mine was trying to improve a slow transport system
for moving coal from the face to the main belt. As two of the team was known to be particularly
vociferous, with another two being quiet but known thinkers, the foreman asked the site quality manager
to facilitate a session that would help to identify a way to improve the system, but which would allow all
shift members to contribute equally. Then ideas are given to floor for vote and ranking.

Delphi technique- Named after the ancient Greek Oracle at the city of Delphi technique is a method of
forecasting personnel needs. It solicits estimates of personnel needs from a group of experts, usually
mangers. The HRP experts act as intermediaries, summaries the various responses and report the findings
back to the experts. The experts are surveyed again after they receive this feedback. Summaries and
surveys are repeated until the experts opinions begin to agree. The agreement reached is the forecast of
the personnel needs. The distinguishing feature of the Delphi technique is the absence of interacting
among experts.

For example, the HR departments may survey all production supervisors and managers until an
agreement is reached on the number of replacements needed for the next year.

2. Trend projection forecast:

This is the quickest forecasting technique. The technique involves studying past ratios. This method helps
to calculate the ratios on the basis of past data. Firstly, it calculates the future ratios on the basis of the
time series analysis/extrapolation, after making allowances for the changes in the organization, method,
and jobs, if any. Extrapolation is mathematical extensions of past data into the future time period. Moving
averages and exponential smoothing can help for projections. The company estimates the demand for
human resources on the basis of ratios and indexation is a method of estimating future employment needs
by matching employment growth with an index.

For example, planners may discover that for each million-dollar increases in sales, the production
department requires ten new assemblers.

But these methods are very inaccurate in long-range HR projections. For these reason, uses of statistical
analyses are more effective for predicting changes in the underlying causes of demand for human
resources. Statistical techniques focus on the quantitative side of manpower planning. Techniques such as
ratio and percentage calculations typically are used to provide answers to “what” rather than “how” types
of questions. Statistical techniques provide information relating to staffing availability, current and future
needs and cost considerations but aren’t effective in assessing how to accomplish a task or objective. For
example, a business might determine from observing the competition, it will need a ratio of 1:5 or one
employee for every $50,000 of merchandise it expects to sell. Applying this ratio to an annual sales
forecast tells HR how many sales employees the business will require.

3. Other forecasting methods

Other forecasting methods Includes Budget & planning analysis, New-venture analysis, Computer
models. New venture analysis will be useful when new ventures contemplate employment planning. This
technique requires planners to estimate HR needs in line with companies that perform similar operations.
For example, a petroleum company that plans to open a coal mine can estimate its future employment
needs by determining employment levels of other coal mines. Among these, most sophisticated
forecasting approaches involve computer models.

Shortcomings of methods used to forecasts:

Major shortcomings of forecasting techniques are future in any country is uncertain i.e. there are political,
cultural, technological changes taking place every day, Conservative attitude of top management, problem
of surplus staff , time consuming activity, expensive process.

It must be realized that an area such as human resource forecasting, the degree of uncertainty is so great
that exact and always correct predictions are impossible, so a high degree of error is to be expected.
Another particular weakness is that future developments are not always predicted correctly by the
consensus of the experts. Another problem is the inability of the experts to make complex forecasts with
multiple factors.