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  PLAN
Salary  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.