Chapter 5
The HR
Forecasting
Process
1
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
2
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
3
Learning Outcomes
After reading this chapter, you should
be able to:
• Describe the relevant time periods for
future estimates of HR demand and
supply.
4
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
5
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.
6
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.
7
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
8
Benefits of HR
Forecasting
1. Reduces HR costs
2. Increases organizational flexibility
3. Ensures a close linkage to the macro
business forecasting process
9
Benefits of HR
Forecasting
©Igor.Stevanovic/Shutterstock
4. Ensures that organizational
requirements take
precedence over issues of
resource constraint and
scarcity (HR Supply and HR
Demand)
10
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
11
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
12
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.
13
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.
14
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
15
©Kartouchken/Shutterstock
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
16
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
17
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
18
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
19
HR Shortage or
Surplus
HR shortage:
Demand > Supply
HR surplus:
Supply > Demand
20
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
21
Dealing with
Shortages
• External Recruitment: Finding employees
from outside the organization
22