human resource demand forecasting-ppt

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Forecasting as a Part of Human Resource Forecasting as a Part of Human Resource PlanningPlanning

DEMAND FORECASTING

SUPPLY FORECASTING

Determine organizational

objectives

Demand forecast for

each objective

Aggregate demand forecast

Does aggregate supply meetaggregatedemand?

Go to feasibility analysis steps

Choose human resource programs

External programs

•Recruiting

•External selection

•Executive exchange

Internal programs

•Promotion

•Transfer

•Career planning

•Training

•Turnover control

Internal supply forecast External supply forecast

Aggregate supply forecast

No

Yes

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Long Range Objectives & Plans

Overall Requirements

for human resources

Work force Requirements by

occupational categories job skills etc

Short terms goals, plans, programmes

& budgets

Inventory of Present Human

Resources

Inventory by Occupationalcategories skills,Demographic characteristics

Procedure forEvaluating Effectiveness orHuman Resources

Net New Human Resource

Requirement Leading to

action planning. For Recruitment

& Selection Needed

Needed Replacement or additions. Leading to plans for developing, transferring, recruiting & selecting needed people

MAN POWER DEMAND FORECASTING

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Causes of Demand for Human Causes of Demand for Human ResourcesResources

Causes of Demand for Human Causes of Demand for Human ResourcesResources

Economic Economic developmentsdevelopments

Social-Social-political-legal political-legal challengeschallenges

Technological Technological challengeschallenges

CompetitorsCompetitors

Strategic planStrategic plan

BudgetsBudgets

Sales & Sales & production production forecasts forecasts

New venturesNew ventures

Organizational Organizational & job design& job design

RetirementsRetirements

ResignationsResignations

TerminationsTerminations

DeathsDeaths

Leaves of Leaves of absenceabsence

ExternalExternal OrganizationalOrganizational WorkforceWorkforce

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HRP and Environmental ScanningHRP and Environmental Scanning

Environmental ScanningEnvironmental Scanning

– The systematic monitoring of the major external forces The systematic monitoring of the major external forces influencing the organization.influencing the organization. Economic factors: general and regional conditionsEconomic factors: general and regional conditions Competitive trends: new processes, services, and Competitive trends: new processes, services, and

innovationsinnovations Technological changes: robotics and office automation Technological changes: robotics and office automation Political and legislative issues: laws and administrative Political and legislative issues: laws and administrative

rulings rulings Social concerns: child care and educational priorities Social concerns: child care and educational priorities Demographic trends: age, composition,and literacyDemographic trends: age, composition,and literacy

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Scanning the Internal EnvironmentScanning the Internal Environment Cultural AuditsCultural Audits

– Audits of the culture and quality of work life in an Audits of the culture and quality of work life in an organization.organization. How do employees spend their time? How do employees spend their time? How do they interact with each other? How do they interact with each other? Are employees empowered?Are employees empowered? What is the predominant leadership style of managers?What is the predominant leadership style of managers? How do employees advance within the organization?How do employees advance within the organization?

BenchmarkingBenchmarking

– The process of comparing the organization’s processes The process of comparing the organization’s processes and practices with those of other companies.and practices with those of other companies.

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Forecasting HR RequirementsForecasting HR Requirements

Estimate of numbers and kinds of employees the organization Estimate of numbers and kinds of employees the organization will need to implement organizational strategies and attain will need to implement organizational strategies and attain organizational objectives on future dates.organizational objectives on future dates.

Demand for firm’s goods or services must be forecast.Demand for firm’s goods or services must be forecast. Involves consideration of alternative ways of organizingInvolves consideration of alternative ways of organizing jobs jobs

(job design, organizational design or staffing jobs)(job design, organizational design or staffing jobs) Example - Peak production could be handled by temporary Example - Peak production could be handled by temporary

workers or assigning overtime. Machine breakdowns assigned workers or assigning overtime. Machine breakdowns assigned to maintenance department or handled by machine operatorsto maintenance department or handled by machine operators

Forecast is then converted into people requirementsForecast is then converted into people requirements

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DEMAND FORECASTING

Assumptions of Political

environment

Assumptions of Social environment

Business Plans

Assumptions of Technology Conditions

Assumptions of Labor market

Assumptions of Economic Trends

Assumptions at the Time of demand Forecasting

Time Time FrameFrame

Requirement Requirement basisbasis

AvailabilityAvailability Possible action plans Possible action plans to meet the to meet the requirementsrequirements

Less than a Less than a yearyear

Annual budget Annual budget (operational (operational plans)plans)

Existing manpower (by Existing manpower (by proper distribution of proper distribution of workload ) workload ) +contractual +contractual manpowermanpower

Body shoppers/contractors, Body shoppers/contractors, overtime , recruitment on overtime , recruitment on contractual terms, contractual terms, restructuring and layoffs.restructuring and layoffs.

1-2 Years1-2 Years Forecasted Forecasted budget or forward budget or forward budget (business budget (business plans)plans)

Current manpower Current manpower less projected attritionless projected attrition

Transfer, promotion, Transfer, promotion, restructuring, redundancy, restructuring, redundancy, Training and developmentTraining and development

2-5 years2-5 years Long term plansLong term plans Projected manpower Projected manpower (including those (including those trainees who will be trainees who will be inducted during the inducted during the period)period)

Succession plans, Succession plans, recruitment, training and recruitment, training and development , development , restructuring , redundancyrestructuring , redundancy

More than 5 More than 5 yearsyears

Perspective plansPerspective plans Labor market , Labor market , education systemeducation system

Succession plans, MDP, Succession plans, MDP, OD, redeployment, job OD, redeployment, job restructuringrestructuring

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Social Factors - It is common experience that a number of well-conceived projects either do not takeoff or get delayed due to social pressures. In such an event, the human resource demand forecasts made by the planners will undergo substantial changes. Delays result in cost escalation, changes in technology to accommodate the needs/sentiments of society, changes in the location of the project etc.

Technological Factors -Rapid changes in technology many a times adversely affect human resources forecasts. From the time a project is conceived to the time is implemented, substantial time lag may occur during which, changes in technology may make the entire project unviable.

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Political Factors -Unforeseen political factors might make considerable impact on the business plans of enterprises. This is true especially for those organizations which depend mostly only on international markets either for the sourcing of their raw materials or for selling of their products and services.

Economic Factors -Economic factors often result in several planned activities being forced to undergo considerable change.

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Demand Generation - The reasons for the creation of employee demands are:

Growth - Growth, in traditional business, may lead to demand for higher levels of production, sales volumes and services.

Employee Turnover- Employee turnover or attrition is another reason for generation of manpower demands in an organization.

Technological Shifts-Changes in technology makes an impact on an enterprise in more than one fashion. This may change the methods of manufacturing, processes and techniques, selling strategies could also become different and in the office, automation could bring about a major change in the nature of work. Such changes may result in a redundant and surplus workforce and might also bring about shortages in the new skills required to manage the technology.

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(i) quantify the jobs necessary for producing a given number of goods, or offering a given amount of services;

(ii) determine what staff-mix is desirable in the future;

(iii) assess appropriate staffing levels in different parts of the organization so as to avoid unnecessary costs;

(iv) prevent shortages of people where and when they are needed most; and

(v) monitor compliance with legal requirements with regard to reservation of jobs.

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Forecasting Demand for Forecasting Demand for EmployeesEmployees

Quantitative MethodsQuantitative MethodsQuantitative MethodsQuantitative Methods

Qualitative MethodsQualitative MethodsQualitative MethodsQualitative Methods

Forecasting DemandForecasting DemandForecasting DemandForecasting Demand

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Trend Projection ForecastsTrend Projection ForecastsTrend Projection ForecastsTrend Projection Forecasts

ExtrapolationExtrapolation

– Extending past rates of change into the futureExtending past rates of change into the future IndexationIndexation

– Matching employment growth with an index eg. Matching employment growth with an index eg. ratio of production employee to salesratio of production employee to sales

Forecasts employment requirements on the basis of some organizational index and is one of the most commonly used approaches for projecting HR demand.

It involves the following steps:1. Select an appropriate business factor. This should be the best available

predictor of human resources needs. Frequently, sales or value added (selling price minus costs of materials and supplies) is used as a predictor in trend analysis.

2. Plot a historical trend of the business factor in relation to number of employees. The ratio of employees to the business factor will provide a labor productivity ratio (for example, sales per employee).

3. Compare the productivity ratio for at least the past five years.4. Calculate human resources demand by dividing the business factor by

the productivity ratio.5. Finally, project human resources demand out to the target year.

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Example of Trend Analysis of HR Example of Trend Analysis of HR DemandDemand

2001 $2,351 14.33 164

2002 $2,613 11.12 235

2003 $2,935 8.34 352

2004 $3,306 10.02 330

2005 $3,613 11.12 325

2006 $3,748 11.12 337

2007 $3,880 12.52 310

2008* $4,095 12.52 327

2009* $4,283 12.52 342

2010* $4,446 12.52 355

BUSINESS LABOR = HUMAN RESOURCES

FACTOR PRODUCTIVITY DEMANDYEAR (SALES IN THOUSANDS) (SALES/EMPLOYEE) (NUMBER OF EMPLOYEES)

*Projected figures

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Other Forecasting MethodsOther Forecasting MethodsOther Forecasting MethodsOther Forecasting Methods

Budget and Planning AnalysisBudget and Planning Analysis– Organizations that need human resource planning Organizations that need human resource planning

generally have detailed budgets and long-range plansgenerally have detailed budgets and long-range plans

New-Venture analysisNew-Venture analysis– New venture analysis will be useful when new New venture analysis will be useful when new

ventures contemplate employment planning. This ventures contemplate employment planning. This technique requires planners to estimate HR needs in technique requires planners to estimate HR needs in line with companies that perform similar operations. line with companies that perform similar operations.

Computer-based Simulation ModelsComputer-based Simulation Models– More sophisticated forecasting approaches involving More sophisticated forecasting approaches involving

computer and computer models computer and computer models

Employment data over a period of time are used under this method as a basis for manpower forecast.

When we record employment levels over a time period, we observe the 5 elements in it:

1. Trend2. Cyclical Effects3. Seasonality4. Step5. Random fluctuations

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Average of the combined employment level data for the recent past is considered as the forecasted employment level for the next period.

This technique is useful to guard against random fluctuations.

After each period elapses , the figure for the oldest period is dropped and the figure for the newest period is added for our subsequent computation of manpower requirements .

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Zero-based forecastingZero-based forecasting – uses current level as starting – uses current level as starting point for determining future staffing needspoint for determining future staffing needs

Bottom-up approachBottom-up approach – each level of organization, starting – each level of organization, starting with lowest, forecasts its requirements to provide aggregate with lowest, forecasts its requirements to provide aggregate of employment needsof employment needs

Mathematical modelsMathematical models –Assist in forecasting. Relationship –Assist in forecasting. Relationship between sales demand and number of employees needed is between sales demand and number of employees needed is positive one.positive one.

SimulationSimulation – technique with experimenting with real-world – technique with experimenting with real-world situation through a mathematical modelsituation through a mathematical model

Flow Models - Flow models are very frequently associated with forecasting personnel needs. The simplest one is called the Markov model. In this technique, the forecasters will :

1. Determine the time that should be covered. Shorter lengths of time are generally accurate than longer ones. However, the time horizon depends on the length of the HR plan which, in turn, is determined by the strategic plan of the organization.

2. Establish categories, also called states, to which employees can be assigned. These categories must not overlap and must take into account every possible category to which an individual can be assigned. The number of states can neither be too large nor too small.

3. Count annual movements (also called ‘flows’) among states for several time periods. These states are defined as absorbing (gains or losses to the company) or non-absorbing (change in position levels or employment status). Losses include death or disability, absences, resignations and retirements. Gains include hiring, rehiring, transfer and movement by position level.

4. Estimate the probability of transitions from one state to another based on past trends. Demands a function of replacing those who make a transition.

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Analysis of present and future workload depends on the possibility of quantifying the work content in every area of an organizational.

Steps in workload analysis:1. Classification of work2. Forecasting the number of jobs3. Converting the projected jobs in man-hours4. Converting the man-hours into manpower

requirement

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Work-study TechniqueWork-study Technique Work-study techniques can be used when it is possible to apply work Work-study techniques can be used when it is possible to apply work

measurement to calculate the length of operations and the amount of labor measurement to calculate the length of operations and the amount of labor required. required.

The starting point in a manufacturing company is the production budget, The starting point in a manufacturing company is the production budget, prepared in terms of volumes of salable products for the company as a prepared in terms of volumes of salable products for the company as a whole, or volumes of output for individual departments.whole, or volumes of output for individual departments.

The budgets of productive hours per unit of output are then multiplied by the The budgets of productive hours per unit of output are then multiplied by the planned volume of units to be produced to give the total number of planned planned volume of units to be produced to give the total number of planned hours for the period. hours for the period.

This is then divided by the number of actual working hours for an individual This is then divided by the number of actual working hours for an individual operator to show the number of operators required. operator to show the number of operators required.

Allowance will have to be made for absenteeism and idle time.Allowance will have to be made for absenteeism and idle time.

Work-study techniques for direct workers can be combined with ratio-trend Work-study techniques for direct workers can be combined with ratio-trend analysis to forecast for indirect workers, establishing the ratio between the analysis to forecast for indirect workers, establishing the ratio between the two categories.two categories.

The same logic can be extended to any other category of employees.The same logic can be extended to any other category of employees.

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Qualitative Approaches to Demand Qualitative Approaches to Demand

ForecastingForecasting Management ForecastsManagement Forecasts

The opinions (judgments) of supervisors, department managers, experts, The opinions (judgments) of supervisors, department managers, experts, or others knowledgeable about the organization’s future employment or others knowledgeable about the organization’s future employment needs.needs.

centralized approachcentralized approach—the HR department examines the current —the HR department examines the current business situation and determines staffing requirements for the rest of business situation and determines staffing requirements for the rest of the firmthe firm

decentralized approachdecentralized approach—each unit or functional manager subjectively —each unit or functional manager subjectively derives his/her own staffing needs, and the projections are aggregated derives his/her own staffing needs, and the projections are aggregated to create an overall composite forecast for the companyto create an overall composite forecast for the company

Delphi Technique: An attempt to decrease the subjectivity of forecasts by Delphi Technique: An attempt to decrease the subjectivity of forecasts by soliciting and summarizing the judgments of a preselected group of soliciting and summarizing the judgments of a preselected group of individuals. The final forecast represents a composite group judgment.individuals. The final forecast represents a composite group judgment.

nominal group techniquenominal group technique—formalized problem-solving method similar to —formalized problem-solving method similar to the Delphi method but instead the experts meet in a face-to-face group the Delphi method but instead the experts meet in a face-to-face group discussion and rank ideas by member votediscussion and rank ideas by member vote

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Quantitative Methods of Forecasting HR Quantitative Methods of Forecasting HR DemandDemand

Moving average

Exponential smoothing

Trends projections

• Averages data about HR demand from recent periods and projects them into the future

• Forecasters can vary weights for HR demand assigned to different past time periods used to project future HR demand.

• Numbers of people hired or requested placed on one axis; time is placed on the other axis. A straight line is plotted from past to future to predict HR demand.

• Simplicity.

• Data easily available.

• May be used to take into account factors ignored by the moving average method (for example, cyclical patterns).

• Easily explained to managers.

• Easily prepared by HR planners.

• Simplicity.

• Data easily available.

• May be used to take into account factors ignored by the moving average method (for example, cyclical patterns).

• Easily explained to managers.

• Easily prepared by HR planners.

Method Description Advantages Disadvantages

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Quantitative Methods of Forecasting HR Quantitative Methods of Forecasting HR Demand (cont.)Demand (cont.)

Regression

Linear programming

Actuarial models

• Mathematical formula used to relate staffing to several variables (for example, output, product mix, per capita productivity).

• Assesses required staffing level that matches desired output levels, subject to certain constraints (for example, budget, cost).

• Relate turnover to such factors as age and seniority.

• Can include many variables.

• Efficient use of all available data.

• Assesses what should be in the future, not what probably will be.

• Reflect past.

• Mathematical complexity.

• Requires large sample sizes.

• Relies on past data.

• Managers are skeptical of highly sophisticated methodology.

• Numerous assumptions must be made.

• May not be accurate in individual cases.


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• Uses scenarios to test the effect of various personnel policies.

• Define “states” in the organization—such as strategy levels, performance ratings.

• Identify time period.

• Multiply number of people in each job category by the probability of movement between job/position categories. Model assumes that current job/position category is the chief determinant of movement.

• Useful for considering alternative HR programs.

• Help identify career patterns.

• Help perform turnover analysis.

• Adequate for considering alternative effects of various HR strategies.

• Accuracy varies.

• Require some mathematical sophistication.

• Accuracy varies.

• Not adequate for long-term forecasts.

• Requires mathematical sophistication.


Simulations

Probability matrixes

First-order Markov model

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• Same as first-order Markov model except that probability of movement is determined by (1) job/position category and (2) the individual’s length of stay in the job class.

• More inclusive than a first-order Markov mode.

• Not very useful for considering alternative effects of various HR strategies.

• Requires mathematical sophistication.


Semi-Markov model

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Qualitative Methods of Forecasting HR Qualitative Methods of Forecasting HR Demand or SupplyDemand or Supply

• A group of experts exchanges several rounds of estimates of HR demand or supply, normally without meeting face to face. Feedback from other experts is used by each individual to “fine-tune” his or her independent estimate.

• A small group of experts meets face to face. After a procedure that involves open discussion and private assessments, the group reaches a judgment concerning future HR demand or supply.

• Can involve key decision makers in process.

• Can focus on what is expected or desired in future.

• Not bound to the past.

• Same as for Delphi technique.

• Group discussions can facilitate exchange of ideas and greater acceptance of results by participants.

• Highly subjective.

• Judgments may not efficiently use objective data.

• Same as for Delphi technique.

• Group pressure may lead to less accurate assessments that could be obtained through other means.


Delphi technique

Nominal group technique

human resource demand forecasting-ppt

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