Demand Planning

HR forecasting is the process of ascertaining the net requirements for staff by determining present and future HR needs.

Learning Objective

Explain the benefits of HR forecasting

Key Points

HR forecasting can be categorized into transaction-based forecasting, event-based forecasting, and process-based forecasting (which is not focused on a specific internal organizational event but on the flow or sequencing of several work activities).
Transaction-based forecasting focuses on tracking internal change by the organization's managers. Event-based forecasting is concerned with changes in the external environment. Process-based forecasting is focused on the flow or sequencing of several work activities.
HR forecasting can reduce HR costs, increase organizational flexibility, ensure a close linkage to the Macro Business Forecasting Process, and ensure that organizational requirements take precedence over issues of resource constraint and scarcity.
The HR process may be affected by environmental factors including the economy, laws and regulations, product life cycles, technology changes, demographic changes, organizational factors, etc.
The five stages of the HR forecasting process are: identifying organizational goals, objectives and plans, determining overall demand requirements for personnel, assessing in-house skills and other internal supply characteristics, determining the net demand requirements that must be met from external, environmental supply sources and developing HR plans and programs to ensure that the right people are in the right place.
The HR process may be affected by environmental factors including the economy, labor markets and unions, governmental laws and regulations, industry product life cycles, technology changes, demographic changes, etc. The HR process may also be affected by organizational factors such as restructuring, strategic goals, corporate missions, job satisfaction, workforce coverage, job analysis, organizational culture, etc.
HR forecasting can be categorized into current, short-run, medium-run and long-run forecasting. Current forecasting can be used to meet the immediate operational needs of the organization. (Up to the end of the current operating cycle, or a maximum of one year into the future. ) On the other hand, long-run forecasting typically extends five or more years ahead of the current operational period. Due to the number of changes that could affect an organization's operations, the long-run forecast is extremely flexible.

Terms

forecast
An estimation of a future condition.
restructuring
A reorganization; an alteration of structure.
mission
A set of tasks that fulfills a purpose or duty; an assignment set by an employer.

Example

An HR forecaster at a large firm, like a pharmaceutical company, may examine a variety of different internal and external factors. She may consider the workforce demand for the pharmaceutical company, like how many researchers and chemists the company may need, assess the in-house skills of the current employees, and develop programs to develop the new and existing workforce of the company. The HR forecaster will also consider environmental factors, such as the pharmaceutical market, technological changes in pharmaceutical production, and demographic changes of employees and customers.The forecaster will consider organizational factors as well, such as the company's corporate mission, operational goals, and pharmaceutical production budgets. Finally, the HR forecaster will consider these plans over a time horizon that is approved by an HR manager.

Full Text

Demand Planning

HR Forecasting and Planning

HR forecasting is the heart of the HR planning process. The purpose of HR forecasting is to ascertain the net requirements for staff by determining the levels of demand for, and supply of, human resources now and in the future.

Forecasting Activity Categories

Transaction-based forecasting focuses on tracking internal change instituted by the organization's managers.
Event-based forecasting is concerned with changes in the external environment.
Process-based forecasting is not focused on a specific internal organizational event but on the flow or sequencing of several work activities.

Benefits of HR Forecasting

Reduces HR costs.
Increases organizational flexibility.
Ensures a close linkage to the Macro Business Forecasting Process.
Ensures that organizational requirements take precedence over issues of resource constraint and scarcity.

HR Demand is the organization's projected requirement for human resources, whereas HR Supply is defined as the source of workers to meet demand requirements, obtained either internally (current members of the organization's workforce) or from external agencies.

Key Personnel Analyses Conducted by HR Forecasters

Specialist/Technical/Professional Personnel: These employees tend to be in high demand due to trade qualifications that are essential.
Employment Equity-Designated Group Membership: Should be a proportional representation of each grouping. Examples of these groups include African Americans, women, and those with disabilities.

5 Stages of the Forecasting Process

Identify organizational goals, objectives, and plans.
Determine overall demand requirements for personnel.
Assess in-house skills and other internal supply characteristics.
Determine the net demand requirements that must be met from external, environmental supply sources.
Develop HR plans and programs to ensure that the right people are in the right place .

Environmental factors affecting the HR process include the following:

economy,
labor markets and unions,
governmental laws and regulations,
industry and product life cycles,
technological changes,
competitor labor usage,
global market for skilled labor,
demographic changes.

The following are the organizational factors affecting HR forecasting:

Corporate mission, strategic goals;
Operational goals, production budgets;
HR Policies;
Organizational structure, restructuring;
Worker KSA's, competencies, expectations;
HRMS level of development;
Organizational culture, climate, job satisfaction, communications;
Job analysis, workforce coverage, current data.

HR Forecasting Time Horizons

Current Forecast

The current forecast is the one being used to meet the immediate operational needs of the organization (up to the end of the current operating cycle, or a maximum of one year into the future).

Short-Run Forecast

The short-run forecast extends forward from the current forecast and states the HR requirements for the next one-to-two year period beyond the current operational requirements.

Medium-Run Forecast

Typically, the medium-run forecast identifies requirements for two to five years into the future.

Long-Run Forecast

The long-run forecast extends five or more years ahead of the current operational period. Due to the number of changes that could affect an organization's operations, the long-run forecast is extremely flexible.

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