2013
28 27
Literature Review about Human Resource
Management HRPM and Labor Forecasting
Presented by:
Siham Gourida
Doctorat –PHD- Student
Nanchang University – CHINAsiham.hamadat@yahoo.com
Abstract
We are currently facing the ‗golden era‘ of workforce planning (Sullivan, 2002a). Whilst
some organizations have been conducting workforce planning since the 1960s, there has
been a considerable resurgence of interest in the last decade as it has risen to become one
of the ‗hottest topics on the planet‘ (Sullivan, 2002a). Despite the recent enthusiasm, the
implementation of workforce planning continues to present difficulties to practitioners
and it has been described as ‗one of today‘s greatest business challenges‘ (Laabs, 1996).
The objective of human resources strategy is to manage labor and design jobs so people
are effectively and efficiently utilized. Job analysis defines the duties and human
requirements of the company‘s jobs. the next step are to recruit and select employees. T
he recruitment and selection process include a series of hurdles as follow;
 Decide what positions to fill through personnel planning and forecasting.
 Build a pool of candidates for these jobs, by recruiting external and internal
candidates.
 Have candidates complete application forms and perhaps undergo initial screening
interviews.
 Use selection tools like tests, background investigations, and physical exams to
identify viable candidates.
 Decide who to make an offer to, by having the supervisor and perhaps other interview
the candidates.
This paper draws on academic literature, practitioner literature and case studies to
understand the issues surrounding workforce planning, focusing on the labor supply and
demand Forecasting process and its‘ qualitative and quantitative techniques.
Key words: human resources planning, job design, forecasting, labor supply, labor
demand.
‫الملخص‪:‬‬
‫َذٍ َٕاجّ دان‪ٛ‬ا "انؼصش انزْب‪ "ٙ‬نتخط‪ٛ‬ط انقٕٖ انؼايهت (‬
‫انًُظًاث قذ اػتًذث إجشاء تخط‪ٛ‬ط انقٕٖ انؼايهت يُز‬
‫دسب سٕن‪ٛ‬فاٌ‪ .)2002 ،‬ف‪ ٙ‬د‪ ٍٛ‬أٌ بؼط‬
‫‪ٔ .1960‬قذ تزا‪ٚ‬ذ االْتًاو ف‪ ٙ‬انؼقذ األخ‪ٛ‬ش بٓزا‬
‫انًٕظٕع ن‪ٛ‬صبخ يٍ اكثش انًٕاظ‪ٛ‬غ انًثاسة ػهٗ انصؼ‪ٛ‬ذ انؼانً‪ .ٙ‬ػهٗ انشغى يٍ رنك فئٌ تخط‪ٛ‬ط انقٕٖ‬
‫انؼايهت ال‪ٚ‬زال ‪ٕٚ‬اجّ صؼٕباث ٔرنك يأصف بأَّ يٍ اكبش انتذذ‪ٚ‬اث انت‪ ٙ‬تٕاجّ قطاع االػًال ان‪ٕٛ‬و‪.‬‬
‫ٔانٓذف يٍ استشات‪ٛ‬ج‪ٛ‬ت انًٕاسد انبشش‪ٚ‬ت ْٕ إداسة انؼًانت ٔتصً‪ٛ‬ى انٕظائف دتٗ ‪ٚ‬تى استخذاو انؼُصش‬
‫انبشش٘ بفؼان‪ٛ‬ت ٔكفاءة‪ .‬تذه‪ٛ‬م انٕظائف ‪ٚ‬ذذد ٔاجباث ٔيتطهباث انؼايم يٍ ٔظائف انششكت‪ .‬انخطٕة انتان‪ٛ‬ت‬
‫ْ‪ ٙ‬نتجُ‪ٛ‬ذ ٔاخت‪ٛ‬اس انًٕظف‪ .ٍٛ‬ػًه‪ٛ‬ت انتؼ‪ٔ ٍٛٛ‬االخت‪ٛ‬اس تشًم سهسهت يٍ انؼقباث ػهٗ انُذٕ انتان‪:ٙ‬‬
‫تذذ‪ٚ‬ذ انٕظائف انشاغشة يٍ خالل تخط‪ٛ‬ط انقٕٖ انؼايهت ٔانتُبؤ‪.‬‬
‫تذذ‪ٚ‬ذ يجًٕع انًتقذي‪ ٍٛ‬نٓزِ انٕظائف يٍ انًذ‪ٛ‬ط انذاخه‪ٔ ٙ‬انخاسج‪ ٙ‬نهًؤسست‪.‬‬
‫ق‪ٛ‬او انًششذ‪ ٍٛ‬باستكًال استًاساث انطهب ٔانخعٕع ٔسيقابالث انفذص األٔن‪.ٙ‬‬
‫استخذاو أدٔاث االخت‪ٛ‬اس يثم االختباساث ٔااليتذاَاث انبذَ‪ٛ‬ت نتذذ‪ٚ‬ذ قائًت انًششذ‪ ٍٛ‬انًقبٕن‪.ٍٛ‬‬
‫تذذ‪ٚ‬ذ يٍ االجذس بًُصب انؼًم انًتاح يٍ خالل انًقابالث يغ انًششف‪. ٍٛ‬‬
‫ْزِ انًذاخهت تقذو يهخصا َظش‪ٚ‬ا ٔػًه‪ٛ‬ا ٔبؼط دساساث انذانت ٔااليثهت نفٓى انقعا‪ٚ‬ا انًذ‪ٛ‬طت بتخط‪ٛ‬ط انقٕٖ‬
‫انؼايهت‪ ,‬يغ انتشك‪ٛ‬ز ػهٗ ػًه‪ٛ‬ت انتُبؤ بانطهب ٔانؼشض ػهٗ انؼًانت‪ٔ ,‬تقُ‪ٛ‬اث انتُبؤ انُٕػ‪ٛ‬ت ٔانكً‪ٛ‬ت‪.‬‬
‫الكلمات الرئيسية‪ :‬تخطيط الموارد البشرية‪ ،‬تصميم الوظائف‪ ،‬التنبؤ‪ ،‬توفير العمل‪ ،‬الطلب على اليذ العاملة‪.‬‬
Introduction
Organizations typically plan their future needs for supplies, equipment, building capacity, and
financing. Organizations must also plan to ensure that their human resource needs are satisfied.
Human resource planning involves identifying staffing needs, forecasting available personnel,
and determining what additions or replacements are required to maintain a staff of the desired
quantity and quality to achieve the organization‘s goals. The human resource planning function
involves at least three different elements: job analysis, forecasting demand and supply, and legal
restraints.
1. Literature Review on Human Resources Planning
Historical Background of HRP
Workforce planning grew during the 1960s and early 1970s in a period of relative economic
stability when unemployment was low and organizations were faced with supply shortages and
the need to improve labor utilization (see Reilly, 1996). It remained a significant practice in most
large HR departments‘ right up until the economic downturn of the 1980s when the failure to
prove the economic value of workforce plans resulted in many efforts being eliminated (Sullivan,
2002b).
A number of factors contributed to the rejection of workforce planning over this period. The
traditional approach had been highly mechanistic and concerned with ‗head count‘ rather than
‗head content‘, which prevented it from being flexible enough to meet the changing conditions
(Castley, 1996).
Furthermore, the fluctuating economy led some to regard planning as a futile activity (Reilly,
1996). The mood at the time was captured by the following quotation, taken from Minzberg
(1994):
Those that say they make plans and that they work are liars. The term planning is imbecilic;
everything can change tomorrow.
In the latter part of the 1990s workforce planning started to creep back onto the HR agenda.
Today it represents a high priority for an increasing number of organizations as they realize that
the need for planning is greater than ever (Sullivan, 2002b). There is an awareness of the
importance of skill development in an environment that requires adaptability rather than stability.
There is recognition that employee contribution must be maximized through better utilization
and deployment. Finally, there is an understanding of the need to frame employee tasks in the
context of business plans and to make them more challenging in the drive for continuous
business improvement.
Whilst unpredictability is rife, there are common pressures facing organizations. Minzberg (1994)
reminds us that:
To pronounce any environment permanently turbulent is as silly as to call it permanently stable.
Environments are always changing in some dimensions and are always remaining stable in
others.
Nowadays organizations need to plan for their own survival as they grapple to deal with:
intensified competition from home and abroad; labor market factors, recruitment and retention;
the speed of information acquisition and dissemination; the globalization of economic activities;
consumerism and the drive for quality at an acceptable price (Reilly, 1996). In today‘s business
world, there is no time for catch up if an organization makes mistakes – others will be straight in
there to grab the market share (Sullivan, 2002b).
Definition & objectives of HRP
HRP is a process by which an organization strikes a balance between the human resources
required and acquired in the organization.
―HRP includes estimation of how many qualified people are necessary to carry out the assigned
activities, how many people will be available, and what, if anything must be done to ensure that
personnel supply equals personnel demand at the appropriate time in the future‖
Terry L. Leap and Michael D. Crino
―Human Resource Planning is a process of determining and assuming that the organization will
have an adequate number of qualified persons, available at the proper times, performing jobs
which meet the needs of the enterprise and which provide satisfaction for the individuals
involved.‖ Dales Beach
―HRP is the process – including forecasting, developing and controlling- by which a firm ensures
that it has the right number of people of people at the right places at the right time doing work for
which they are economically most useful.‖ E.B Geisler
What are the objectives of HRP?
We can summarize the objectives of Human Resources planning on the following main points:

Ensure adequate supply of manpower as and when required.

Planning for future needs by deciding how many people, with what skills, the organization
will need. That can decide the fate for your project.

Planning for future balance by comparing the number of employees needed to the number of
present employees who can be expected to stay with the organization. A project manager
should give more time to the human resources experts to work on that.

The ultimate objective is to relate future HR to future enterprise needs so as to maximize the
future return on investment in Human Resources.

Planning for the development of the employees. Make sure how you will be providing
training to the team members or newcomers in your project ideally.
Factors affecting Human Resource Planning
HRP is a dynamic and ongoing process. The process of updating is not very simple, since HRP is
influenced by many factors, which are as follows:  The type of organization determines the
production process and number and type of staff needed.  The human resource needs of an
organization depend on the strategic plan adopted by it. For e.g. the growth of a business calls for
hiring of additional labor, while mergers will need a plan for layoffs.  Organization operates
under different political, social environment and has to carefully formulate the HR policies and
so the HR manager has to evolve suitable mechanism to deal with uncertainties through career
developments, succession planning, retirement schemes etc.  HRP also depends on the time
periods and accordingly the short and long-term plans are adopted. And this time span is based
on the degree of environmental uncertainties.  The type and quality of information used in
making forecasting is an important factor influencing HRP. Accurate and timely human resource
information system helps in getting better quality personnel.  HRP is required to ensure that
suitable candidates should be appointed at the right kind of job.
Importance and Limitations of Human Resources Planning
Following points bring out the need / advantages / role / importance of HRP
To make optimum utilization of human resources: HRP helps to make optimum utilization of the
human resources in the organization. It helps to avoid wastage of human resources.
To forecast manpower requirements: HRP helps to forecast the future manpower requirements of
all organizations. It helps to forecast the number and type of employees who will be required by
the organization in a near future.
To provide manpower: Every organization requires manpower to conduct its business activities.
HRP provides different types of manpower as per the needs of the organizations.
To face manpower problems: HRP helps to face the manpower problems, which are caused by
labor turnover, introduction of new technologies, etc
To integrate different plans: HRP helps to integrate the personnel plans with the other important
plans of the organization.
To make employee development programs more effective: HRP selects the right man for the right
post. The right man will get maximum benefits from the employee development programs.
Therefore, HRP helps to make the employee development programs more effective.
To reduce labor cost: HRP helps to avoid both shortage and surplus of labor. It helps to make
optimum utilization of labor. It also helps to reduce labor turnover. All this helps to reduce labor
cost.
To enable organizations to grow: When an organization grows, the number of jobs also increases.
More employees are required to perform these jobs. HRP helps to supply these employees to the
organizations. So HRP enables the organization to grow.
To identify potential replacements: Each year many employees either retire or leave or are taken
out of the organization. HRP helps to find replacements for these employees. These replacements
may be either from inside or from outside the organization.
To avoid disturbance in the production process: In HRP, the manpower requirements of the
organization are determined well in advance. So the manpower is supplied continuously to the
organization. This helps the production process to run smoothly. Thus, HRP helps to avoid
disturbances in the production process.
Basis for effective recruitment and selection: HRP is the basis for effective recruitment and
selection in the organization. It helps the organization to select the right man for the right post.
Limitations of human resource planning
Human resource planning can be defined as the process of identifying the number of people
required by an organization in terms of quantity and quality. All human resource management
activities start with human resource planning. So we can say that human resource planning is the
principle/primary activity of human resource management. Although HRP is a very
advantageous method it has some limitations which can be explained as follows
1. • It is very difficult to ascertain the future manpower requirements of an organization, the
future is always uncertain. As such the predictions are bound to go wrong.
2. • Human resource planning is more relevant in countries that face scarcity of human
resources. In a country like India, human resource planning is of little assistance since
manpower is available in abundance. Also the legal compulsions render human resource
planning redundant.
3. • Human resource planning is a time consuming and a very costly process. The recruitment
and selection process is time consuming and requires the services of experts to conduct. This
can all add to the cost.
4. • Human resource planning is beneficial where adequate skilled resources are available. In
cases where skilled manpower is not easily available, human resource planning serves no
purpose.
2. Job Design
Job design essentially involves integrating job responsibilities or content and certain
qualifications that are required to perform the same. It outlines the job responsibilities very
clearly and also helps in attracting the right candidates to the right job. Further it also makes the
job look interesting and specialized.
There are various steps involved in job design that follow a logical sequence, those that were
mentioned earlier on. The sequence is as follows:
1.
2.
3.
4.
What tasks are required to e done or what tasks is part of the job?
How are the tasks performed?
What amount are tasks are required to be done?
What is the sequence of performing these tasks?
All these questions are aimed at arriving upon a clear definition of a specific job and thereby
make it less risky for the one performing the same. A well defined job encourages feeling of
achievement among the employees and a sense of high self esteem.
The whole process of job design is aimed to address various problems within the organizational
setup, those that pertain to ones description of a job and the associated relationships. More
specifically the following areas are fine tuned:

Checking the work overload.

Checking upon the work under load.

Ensuring tasks are not repetitive in nature.

Ensuring that employees don not remain isolated.

Defining working hours clearly.

Defining the work processes clearly.
The above mentioned are factors that if not taken care of result into building stress within the
employees.
Benefits of Job Design
The following are the benefits of a good job design:
1. Employee Input: A good job design enables a good job feedback. Employees have the
option to vary tasks as per their personal and social needs, habits and circumstances in the
workplace.
2. Employee Training: Training is an integral part of job design. Contrary to the
philosophy of ―leave them alone‘ job design lays due emphasis on training people so that
are well aware of what their job demands and how it is to be done.
3. Work / Rest Schedules: Job design offers good work and rest schedule by clearly
defining the number of hours an individual has to spend in his/her job.
4. Adjustments: A good job designs allows for adjustments for physically demanding jobs
by minimizing the energy spent doing the job and by aligning the manpower
requirements for the same.
Job design is a continuous and ever evolving process that is aimed at helping employees make
adjustments with the changes in the workplace. The end goal is reducing dissatisfaction,
enhancing motivation and employee engagement at the workplace.
1. Labor specialization
The importance of job design as a management variable is credited to the eighteenth century
economist Adam Smith .Smith suggested that a division of labor would assist in reducing labor
costs of multi-skilled –known as labor specialization- and this accomplished in several ways:
 Development of dexterity and faster learning by the employee because of repetition.
 Less loss of time because the employee would not be changing jobs or tools.
 Development of specialized tools and the reduction of investment because each employee
has only a few tools needed for a particular task.
2. Job enlargement
is a job design technique wherein there is an increase in the number of tasks associated with a
certain job. In other words, it means increasing the scope of one‘s duties and responsibilities. The
increase in scope is quantitative in nature and not qualitative and at the same level.
Benefits of Job Enlargement
The following are the major benefits of Job enlargement
 Reduced Monotony: Howsoever interesting the job may appear in the beginning, sooner
or later people complain of boredom and monotony. Job enlargement if planned carefully
can help reduce boredom and make it more satisfying and fulfilling for the employees.
 Increased Work Flexibility: There is an addition to the number of tasks an individual
performs. There is thus an increased scope of carrying out tasks that are versatile and yet
very similar in certain aspects.
 No Skills Training Required: Since the individual has already been performing the task
in the past, there is no great requirement for imparting of new skills. However people and
time management interventions may be required. The job thus gets more motivational for
the one performing it.
3. Job enrichment
A method of giving an employee more responsibilities that includes some of the planning and
control necessary for job accomplishment.
Job enrichment also opens up a feedback channel for the employees. Employees are frequently
apprised of their performance. This keeps them on track and helps them know their weak and
strong points. Performance standards are set for the employees themselves and future
performances are matched against the benchmarks. All this without any serious intervention or
involvement of the top management.
Benefits of Job Enrichment
Research studies on job enrichment found out decreased levels of absenteeism among the
employees, reduced employee turnover and a manifold increase in job satisfaction. There are
certain cases however where job enrichment can lead to a decrease in productivity, especially
when the employees have not been trained properly. Even after the training the process may not
show results immediately, it takes time to reflect in the profit line.
Job Enrichment and Job Enlargement
1. The difference between job enrichment and job enlargement is essentially of quantity and
quality. Whereas job enlargement means increasing the scope of job quantitatively by
adding up more tasks, job enrichment means improvement in the quality of job such that
employees are more satisfied and fulfilled.
2. Through job enrichment an employee finds satisfaction and contentment in his job and
through job enlargement employee feels more responsible and worthwhile in the
organization.
3. Job enrichment entails the functions of planning and organizing and enlargement
involves execution of the same. Both complement each other, in that job enrichment
empowers and enlargement executes.
4. Job enrichment depends upon job enlargement for success and the reverse in not true.
5. Job enrichment means a vertical expansion in duties and responsibilities and span of
control whereas in job enlargement the expansion is horizontal in nature.
Figure 1: Job enrichment and job enlargement
Source: 运作管理（operation management）中国人民大学出版社。Jay Heizer &Barry Render.8th edition.2008.
4. Employee Empowerment
Is the practice of enriching jobs so employees accept responsibility for variety of decisions
normally associated with staff specialists. Empowering employees helps them take ownership of
their jobs so they have a personal interest in improving performance.
5. Self-Direct Teams
A group of empowered individuals working together to reach a common goal. These teams may
be organized for long or short term objectives. Teams are effective primarily because they can
easily provide employee empowerment, ensure core job characteristics, and satisfy many of the
psycho-logical needs of individual team members.
Self-Direct teams
Empowerment
Enrichment
Enlargement
Increasing
reliance on
employee’s
contribution
and
responsibility
Specialization
Job Expansion
Figure 2: Job Expansion
Source: 运作管理（operation management）中国人民大学出版社。Jay Heizer &Barry Render.8th edition.2008.
Limitations of job expansion
Even if job design that enlarge, enrich, empower and use teams are so good, but it is not
universally used for those limitations:
 Higher capital costs. Job expansion may require facilities that cost more than those with a
conventional layout.
 Individual differences. In discussion about improving the quality of work life, we cannot
forget the importance of individual differences. Differences in individuals provide latitude
for the resourceful operations manager when designing job.
 Higher wages rate.
3. Forecasting Personal Needs
Managers should consider several factors when forecasting personnel needs. The usual process is
to forecast revenues and then, from that, estimate the size of the staff required to achieve this
sales volume, however, in practice the manager will need to consider other factors as well, such
as projected turnover, decisions to upgrade or downgrade products or services, technological
changes, and the department‘s financial resources.
Figure 3: Summary of labor forecasting
Designed by Author
Evaluating the Current Human Resources Situation
1. Defining the Internal Labor Force it is important to define who is included in the
internal labor force. A fatal flaw in the HR planning process is conducting a human resources
audit on a limited or non-representative sample of employees. When determining which
persons should be considered employees, a good measure is those who perform the work or
provide services within the company under the control or supervision of the organization‘s
management team.
2. HR Inventory Identifying current workforce dynamics is a critical step in the
development of an HR plan. A skills inventory is a computerized or manual system designed
to take stock of information about current employees‘ experience, education, compensation
history, and/or unique abilities. A skills inventory can be useful in revealing what skills are
immediately available in an organization by providing a snapshot view of the existing talent in
an organization.
3. Defining the External Labor Force
The external labor force refers to potential sources of human resources outside of an organization
that can affect the future supply of employees. Evaluation of the external labor force relies on
labor market estimates based on regional and global economic, environmental, and demographic
changes. Economic and environment factors include interest rates, unionization, economic
growth, unemployment rates, and political climate. Demographic factors include populationbased information such as retirement rates, birth/mortality rates, educational attainment, primary
language, labor shifts (location), etc. Chapter 11 provides a detailed discussion of the major
external labor force changes that are affecting HR planning.
Forecasting the Labor Supply
The purpose of identifying future HR supply requirements is to determine the number of
employees in each job and their knowledge, skills, abilities, and other characteristics (KSAOs).
In addition, forecasting HR supply is essential in determining the characteristics of hiring sources
within the predetermined planning horizon in order to establish whether future HR supply is
sufficient to match future HR demands. To forecast HR supply, an organization needs to evaluate
both their internal and external labor force. This step is dependent on an accurate assessment of
the current workforce situation.
Forecasting HR supply involves an understanding of internal and external potential human
resource supplies. Due to the availability of data and the multiple methods that can be used,
internal supply is usually easier to establish than external supply. However, it is still important to
try to determine external supply as accurately as possible.
I. Forecasting the Supply of Internal Labor
Knowing the staffing needs satisfies only some of staffing equation. Next, managers have to
estimate the likely supply of both inside and outside candidates. Most firms start with inside
candidates.
The main task here is determining which current employee might be qualified for the projected
positions. In any case managers use several tools for projecting the personal needs.
Trend analysis means studying variations in the firm‘s employment levels over the last few
years. It assumes that past trends and ratios in employee movement are stable and indicative of
future trends and ratios in employee movement. The information collected in the HR audit is
used to identify labor patterns—hiring patterns, retirement patterns, productivity patterns, and
turnover patterns. By examining the trends of the past, the HR department can predict the effect
of the same activity on the future of the organization, because it is assumed that these patterns
will remain stable.
Skills/Competency Models Building on the skills inventory, the skills/competency models focus
on matching the right skills or competencies needed for each job with the skills available within
the organization. Unlike other models that predict headcount (e.g., trend analysis or Markov
models), the skills/competency models focus on identifying the skills/competency supply within
the organization, and helping focus future recruitment, selection, retention, and training activity
in core areas of key skills/competencies needed for the organization to succeed.
Manual Systems and Replacement Charts Department managers or owners of smaller firms
may still use several simple manual devices to track employee qualifications. A personnel
inventory and development record form complies qualifications information on each employee.
Another option is Personal replacement charts, particularly for the firm‘s top positions. They
show the present performance and promotability for each position‘s potential replacement.
Division
Vice president
Vice president-Sales-
Employee B
Vice president-Production-
Vice president-Finance-
Required development
Employee A
Required development
None recommended


Job rotation into finance &
production.
Executive
development
course in strategic planning.
Employee C
Required development
None recommended
Outstanding
Satisfactory
Needs improvement
Ready now
Needs further training
Questionable
Figure 4: management replacement chart showing development needs of potential future
divisional vice presidents.
Resource: 人力资源管理 （human resources management）Gary Dessler。清华大学出版社。11th edition.2010.
Staffing table is graphic representations of all organizational jobs, along with the numbers of
employees currently occupying those jobs and future (monthly or yearly) employment
requirements, which can be derived from demand forecasts.
It presents a simple visual understanding of an organization‘s staffing level within each
department and the organization as a whole, in an effort to help understand the combination of
employees that make up an organization‘s internal workforce.
Markov Analysis A method used to forecast the value of a variable whose future value is
independent of its past history. The technique is named after Russian mathematician Andrei
Andreyevich Markov, who pioneered the study of stochastic processes, which are processes that
involve the operation of chance. The Markov Analysis introduces a method for forecasting
random variables.
A Markov analysis extends beyond the staffing table to help predict internal employee
movement from one year to another by identifying percentages of employees who remain in their
jobs, get promoted or demoted, transfer, and exit out of the organization. By tracking and
predicting employment movement within an organization, the Markov analysis allows for the
development of a transition matrix to forecast internal labor supply.
Example of Markov Method
Made by Author
Time Two
T
i
m
e
O
n
e
Job
A
Job
B
Job
C
Job
D
Job
E
50
Job
A
.60
Job
B
.15
Job
C
.20
75
.10
.80
.05
100 .05
.05
.60
Job
D
Job
E
Exit
.05
.05
.10
200
.80
300
.20
.10
.10
.20
.60
.20
Time Two
Job A
T
i
m
e
Job A 50
Job B 75
Job C 100
O
n
e
.60
(30)
.10
(7.5)
.05
(5)
Job B
Job C
.15
(7.5)
.80
(60)
.05
(5)
.20
(10)
.05
(3.75)
.60
(60)
Job D 200
Job E
300
725
42.5
72.5
73.75
Job D
.10
(10)
.80
(160)
.20
(60)
230
Job E
.10
(10)
.60
(180)
190
Exit
.05
(2.5)
.05
(3.75)
.10
(10)
.20
(40)
.20
(60)
608.75
Forecasting the Supply of External Labor
It is much more difficult to forecast the supply of labor available outside than inside the
organization.. Several reasons account for this. First no centralized, national projections of labor
supplies exist. Second, few firms are large enough to justify the expense of devoting substantial
effort to forecasting external supplies available nationally, regionally, and locally from colleges,
universities, competitors and other resources. Third, organizations differ in their unique
requirements. It will not be enough to forecast general numbers, such as availability of
accounting graduates in the country. It might be more useful to narrow this forecast by focusing
on those graduates possessing several characteristics desired by the firm. Finally, labor
availability differs by location – the population distributionVery little information exists on how organizations estimate external labor supply. Some HR
planners have proposed economic models to estimate labor supply. The prototypes of this
approach were geared to determining, for purposes of equal employment opportunity, how many
people in various sex and race categories could be attracted to employment with one firm.
A more sophisticated approach is based on using scenarios of different economic and
technological conditions. There is just no simple way to go about forecasting external labor
supply.
Forecasting the Demand of Labor
Forecasting HR Demand
Demand analysis identifies the future workforce requirements needed to maintain the
organization‘s mission and goals. The end result of a demand analysis is the identification of the
required number of employees in an organization and the necessary functions that the employee
must perform to meet organizational objectives. In HR planning, labor demand is determined
separately from supply estimates because it facilitates a re-examination of embedded
assumptions about the labor force. As well, different variables affect demand analysis. Due to the
high number of factors that influence demand, demand is often more difficult to predict than
supply. Factors that need to be considered when forecasting demand include the following:
• Environmental scanning, including economic, legislative, and competitive pressures
• The organization‘s future strategic goals and plans
• Expected demand for products or services, including expected sales (across the organization or
at the business unit level)
• Estimated productivity measures of workforce (can be stable, increase, or decrease)
• Organizational design or job design, including technological advancements and administrative
changes
• Projected budgets or financial resource availability
• New products/processes/ventures that the organization will be launching in the future
Due to the high number of environment- and organization-specific variables that influence
demand analysis, there is no single correct way to estimate future HR demand. Instead, a number
of quantitative and qualitative methods are available to aid HR professionals in this step.
Ultimately, the decision of which method to use will be dependant on the size of the organization,
the resources available, and the expertise of the HR planning team. Quantitative techniques for
determining HR requirements include trend analysis, ratio analysis, and regression analysis.
Qualitative approaches to forecasting HR demand require managers to use their experiences to
make expert judgments about future forecasts. This can occur in the form of a Delphi method, a
nominal group technique, or a scenario analysis.
Methods of HR Demand Forecasting
Quantitative Techniques



Trend Analysis
Ratio Analysis
Regression Analysis
Qualitative Techniques



Delphi Method
Nominal group technique
Scenario Analysis
Figure: Methods of labor demand forecasting
Made by Author
Quantitative Techniques for Forecasting HR Demand
Trend Analysis Similar to trend analysis used to forecast internal HR supply, past trends and
ratios can also be used to forecast HR demand. For this purpose, trend analysis predicts the
demand for labor based on projections of past relationship patterns over a number of years
between an operational index (e.g., revenue per employee, productivity per employee) and the
demand for labor (number of employees). As one of the simpler methods of forecasting HR
demand, trend analysis assumes that an organization‘s past employment needs are indicative of
future needs when linked with an operational index.
As a simple example, a hotel determines that each housekeeper can clean 20 rooms a day (an
operational index). The hotel has 1,000 rooms and is projected to be at 100 percent capacity in
the summer season, but 80 percent capacity in the fall season. In this example, the hotel would
use trend analysis to determine that it will need 50 housekeepers for the summer season and 40
in the fall season (rooms occupied daily/index of 20 rooms per housekeeper per day).
Ratio analysis determines future HR demand based on ratios between assumed casual factors
and the number of employees needed. Ratio analysis appears very similar to trend analysis, but
the primary difference is that there is no requirement for significant historical data collection.
This allows organizations that do not have easy access to multiple years‘ worth of data to use
current ratios to help estimate future demand. In addition, while trend analysis links one business
or operational index over time, ratio analysis allows for multiple causal factors to be used to
predict demand. Ratio analysis is also useful in benchmarking organizational efforts with
industry or competitive standards to help identify areas of strength or weakness in an
organization.
For example, suppose a salesperson traditionally generates 500,000$ in sales. If the sales revenue
to salespeople ratio remains the same, you would require six new salespeople next year ( each of
whom produce an extra 500,000$) to produce a hoped – for extra $3 million in sales.
Regression analysis is a more complicated method of estimating HR demand, but allows for
adjustment of seasonal fluctuation, long-term trends, and random movement when forecasting.
This method provides statistical projections using mathematical formulas to determine the
correlation between multiple measureable output factors (independent variables) and an
organization‘s employment level (dependent variable). A regression analysis is useful in
predicting the strength and direction of a linear relationship between two variables, but in
situations of a non-linear relationship, estimates would not be valid.
When there is one independent variable, there is one regression. When there are multiple
independent variables, there are multiple regressions. A correlation depicts a value between _1
and 1. The closer the value is to 0, the less predictive of the relationship between the two
variables. The closer the value is to either -1 or 1, the more predictive the relationship between
two variables. The positive or negative sign in front of the correlation number indicates the
nature or direction of the relationship.
For example, if the correlation between sales and the number of employees is 0.897, then an
organization can interpret that an increase in sales is accompanied by an increase in the number
of employees. In contrast, a correlation between investment in technology and the number of
employees of _0.713 suggests that an increase in technology investments in the company would
decrease the number of employees in the organization. Similarly, a correlation level of
0.012 between productivity and the number of employees represents no significant relationship
between the two variables.
To effectively conduct a regression analysis, the planning team must have access to a large
sample size of data (individual or group level data); have or be able to acquire the statistical skill
set required to run the regression (most often completed using regression software); and be
educated on the interpretation and use of this data. As a result, regression analysis is most often
used in large organizations. This approach is also purely statistical, assuming that the past is the
best predictor of the future. Any changes that alter this assumption while forecasting HR demand
(e.g., new product lines, new ventures, technology, etc.) should be adjusted for accordingly.
Qualitative Techniques for Forecasting HR Demand
Delphi Method The origins of the Delphi method can be traced back to the late 1940s when the
RAND Corporation used a famed ―think tank‖ to estimate how future events effected HR
projections for an organization. 10 This process involves a panel of experts using their judgments
to make estimates of short-term future demands. Experts use a variety of factors to make their
judgments, including economical, demographical, technological, legal, and social conditions
outside of the organization, as well as production, sales, turnover, experiences, and education
levels of the workforce within the organization.
Here we invite different experts and take their opinion and they finally try to find an average of
their ideas. We again intimate the experts about the average opinion, and give them an
opportunity to revise their forecast.
Delphi is useful when you want to have an overall subjective assessment about complex business
environment. All the experts are distant and they don‘t know each other, therefore each one tries
to give the best possible estimate.
Nominal Group Technique The nominal group technique (NGT) was first developed by
Delbecq and VandeVen as an alternative to simple, individual brainstorming of ideas. 12 This
process involves multiple experts (usually line and department managers) meeting face to face to
discuss independently formulated positions of an organizational issue, with the ultimate aim of
securing an accurate assessment of a given situation. NGT can be used to help forecast HR
demand for an organization or can be used to solve other organizational issues (e.g., decisions
about launching new products or processes, managing change, establishing sales targets, etc.).
This technique differs from the Delphi technique in that it encourages face-to-face meetings and
discussions about an issue as a critical step in the decision-making process.
It is similar to Delphi, but here we ask experts to sit together and explain their perspective to
others so that others can also give their opinion.
People frame their estimates individually, but thereafter they give justification for their opinion.
Scenario Analysis Due to the high number of factors that can affect predictions of HR demand,
some organizations prefer to conduct a scenario analysis rather than determining a single demand
scenario (as in the previous methods discussed in this step). Scenario analysis provides multiple
estimates of future HR demand, contingent on a unique set of assumptions and circumstances for
each scenario. This method involves recognizing uncertainties about the future. For example,
forecasts are contingent upon the overall economic outlook of the firm‘s output. An organization
could create three different estimates accordingly, one for a constant economic situation (e.g.,
zero growth), a second for some anticipated economic growth (e.g., five percent growth), and a
third for the possibility of economic decline (e.g., five percent reduction).
Determining labor surpluses and shortages
Organizational objectives help determine what organization action is required to align HR
demand with HR supply. Organizational objectives direct the planning process by identifying the
desired activity to achieve organizational goals.
A gap analysis identifies the differences between the forecasted HR supply and the forecasted
HR demand, focusing on balancing the number and characteristics of employees needed and
available to ensure that supply equals demand. Ideally, the estimated demand and supply could
balance out (identifying no gap in HR forecasts), but this is a rare situation. Most likely, either
HR supply exceeds demand, identifying a projected labor surplus, or HR demand exceeds supply,
identifying a labor shortage.
Using the hypothetical manufacturing firm, as an example of a gap analysis can be examined.
Level
Projected Supply
Plant manager
4
Projected
Demand
3
Gap in Demand for
550 Employees
-1
Department supervisor
16
17
1
Foreman
32
68
36
Machine operator
85
115
30
General Laborer
217
346
129
354
549
195
Total
Table: Gap Analysis on a Hypothetical Manufacturing Firm for 550 Employees
DESIGN AND IMPLEMENT HR PROGRAMS
A comprehensive HR planning team can aid in the successful implementation of the HR plan.
The design and implementation of a plan to correct workforce imbalances can include the need
to increase productivity or the size of the workforce in a labor shortage situation or the need to
change work-terms or decrease the size of the workforce in a labor surplus situation.
EVALUATE THE EFFECTIVENESS OF THE PROGRAMS
1. Evaluating the effectiveness of the programs implemented as part of the HR plan is both
the final
2. Step and a step that loops back to the first step in the HR planning process. Thus,
planning is
3. not linear, but cyclical in that evaluation of the results of one planning cycle establishes
input for
4. The next planning cycle. Chapter 10 identifies the importance of knowing what to
measure and
5. why, as well as developing an understanding of how systems are used to measure HR
metrics (e.g.,
6. Productivity, turnover, quality, etc.).
7. In conclusion, the forecasting of human resource supply and demand can project a labor
8. Surplus or shortage. The next two chapters will discuss methods to deal with a labor
shortage.
Conclusion:
HR planning is a critical component of organizational planning that ensures that the right
resources are available at the right time to achieve organizational goals, vision, and strategy. HR
plans affect many elements of HR, including recruitment, selection, training, development,
organizational structure, and compensation.
• There are four steps in the HR planning process. Before embarking on the HR planning process,
an organization must determine the appropriate planning horizon. This includes creating an
awareness of both immediate and long-term staffing concerns. As well, planners should assess
and accurately understand the current staffing situation in the organization. An HR audit is useful
for collecting information in a meaningful way, but depends on the level of clarity regarding who
is considered to be in the workforce.
• Forecasting HR supply is a component of the first step. There are a number of different triggers
for changes in the internal labor force, including actuary losses, voluntary turnover, and
involuntary turnover. As well, the supply of human resources available outside of the
organization is also in flux. Thus, this step requires the effective mapping of the effects of
internal and external labor forces changes to the organization. Tools such as trend analysis,
skills/competency models, replacement charts, staffing tables, and Markov analysis can be used
in this step.
• Also part of the first step, an HR demand analysis predicts the number of required employees
(quantity and quality) within the predetermined time horizon. This forecast can use quantitative
techniques (trend analysis, ratio analysis, regression analysis) or qualitative techniques (Delphi
method, nominal group technique, scenario analysis) to increase the accuracy of the HR demand
forecast.
• In the second step, evaluation of organizational objectives will drive gap analysis and solutions
analysis. The organizational objectives help determine which program is the most appropriate for
responding to imbalances in required HR demand and projected
HR supply within the organization. In this step, the projected supply is compared to the projected
demand to determine if the organization will experience a labor equilibrium, shortage, or surplus
in the future.
• The third step is implementation of the HR plan.
• The fourth and final step is the evaluation of the plan‘s effectiveness, which then loops back to
the initial HR planning step
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