Chapter 5 The HR
Forecasting Process
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Learning Outcomes
After reading this chapter, you should be able to:
• Identify the three different categories of HR forecasting activity and their relationship to the HR planning process
• State the considerable advantages that
accrue to organizations from instituting effective HR forecasting procedures
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Learning Outcomes
After reading this chapter, you should be able to:
• Discuss the rationale for giving special attention to specialist, technical, and executive personnel groups in the HR forecasting process
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Learning Outcomes
After reading this chapter, you should be able to:
• Describe the relevant time periods for future estimates of HR demand and supply.
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Learning Outcomes
After reading this chapter, you should be able to:
• Identify the various steps in the process of determining net HR requirements and terminology describing types of Outcomes
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Why Is Strategic HR Planning Important to
Organizations?
• Because it attempts to balance between the work that needs to be done and the workforce that performs the tasks to do the work
• Insufficient work and too many employees lead to inefficiencies and lower productivity.
• Employees may become bored and unmotivated and engage in counterproductive behaviours.
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Why Is Strategic HR Planning Important to
Organizations?
• On the other hand, too much work and an insufficient number of employees leads to higher overtime and wages expenses, while at the same time increases the stress and fatigue of the overworked employees.
• Both scenarios will result in an ineffective organization that might compromise its ability to meet its goals and objectives.
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Forecasting Activity Categories
There are three forecasting categories: 1. Transactional-based forecasting:
Focuses on tracking internal change instituted by the organization's managers
2. Event-based forecasting: Concerned with changes in the external environment
3. Process-based forecasting: Not focused on a specific internal organization event, but on the flow or sequencing of several work activities
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Benefits of HR Forecasting
1. Reduces HR costs 2. Increases organizational flexibility 3. Ensures a close linkage to the macro
business forecasting process
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Benefits of HR Forecasting
4. Ensures that organizational requirements take precedence over issues of resource constraint and scarcity (HR Supply and HR Demand)
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tevanovic/Shutterstock
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Human Resources Supply and Demand
Human resources supply: The source of workers to meet demand requirements, obtained either internally (current members of the organization’s workforce) or from external agencies
Human resources demand: The organization’s projected requirement for human resources
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Key Personnel Analyses Conducted by HR Forecasters
1. Specialist/technical/professional personnel 2. Employment equity-designated group
membership 3. Managerial and executive personnel 4. Recruits
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5 Stages of the Forecasting Process
1. Identify organizational goals, objectives, and plans.
2. Determine overall demand requirements for personnel.
3. Assess in-house skills and other internal supply characteristics.
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5 Stages of the Forecasting Process
4. Determine the net demand requirements that must be met from external, environmental supply sources.
5. Develop HR plans and programs to ensure that the right people are in the right place.
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Organizational Factors Affecting HR Forecasting
• Corporate mission, strategic goals • Operational goals, production budgets • HR policies • Organizational structure, restructuring • Worker KSAOs, competencies, expectations • HRMS level of development • Organizational culture, climate, job satisfaction,
communications • Job analysis: Workforce coverage, current data
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HR Forecasting Time Horizons
1. Current forecast: Up to one year
2. Short-run forecast: From one to two years
3. Medium-run forecast: From two to five years
4. Long-run forecast: For five or more years
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Outcomes of Forecasts
Prediction: A single numerical estimate of HR requirements associated with a specific time horizon and set of assumptions
Projection: Incorporates several HR estimates based on a variety of assumptions
Envelope: An analogy in which one can easily visualize the corners of an envelope containing the upper and lower limits, or “bounds,” of the various HR projections extending into the future
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Outcomes of Forecasts
Scenario: A proposed sequence of events with its own set of assumptions and associated program details
Contingency plans: Implemented when severe, unanticipated changes to organizational or environmental factors completely negate the usefulness of the existing HR forecasting predictions or projections; like a backup plan
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Steps in Determining Net HR Requirements
1. Determine HR demand 2. Ascertain HR supply (includes internal
supply and external supply) and skills inventory-personal database record on each employee
3. Determine NET HR requirements 4. Institute HR programs: HR shortage and HR
surplus
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HR Shortage or Surplus
HR shortage: Demand > Supply
HR surplus: Supply > Demand
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Dealing with Surpluses
Job sharing: Occurs when two or more employees perform the duties of one full-time position
Attrition: The process of reducing an HR surplus by allowing the size of the workforce to decline naturally
Hiring freeze: A prohibition on all external recruiting activities
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Dealing with Shortages
• External Recruitment: Finding employees from outside the organization
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