Chapter 4 The HR Forecasting Process

The HR Forecasting Process
Chapter 5The HR Forecasting Process
2 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 procedures2
Discuss the rationale for giving special attention to specialist, technical, and executive personnel
groups in the HR forecasting process3
Describe the relevant time periods for future estimates of HR demand and supply.4
Identify the various steps in the process of determining net HR requirements and terminology
describing types of Outcomes
6 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 workInsufficient work and too many employees lead to inefficiencies
and lower productivity.Employees may become bored and unmotivated and engage in
counterproductive behaviours.
7 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.
8 Forecasting Activity Categories

There are three forecasting categories:Transactional-based forecasting: Focuses on tracking internal
change instituted by the organization's managers
Event-based forecasting: Concerned with changes in the external environmentProcess-based

forecasting: Not focused on a specific internal organization event, but on the flow or sequencing of
several work activities8
9 Benefits of HR Forecasting
Reduces HR costs
Increases organizational flexibility
Ensures a close linkage to the macro business forecasting process9

10 Benefits of HR Forecasting
Ensures that organizational requirements take precedence over issues of resource constraint and
scarcity
11 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 agenciesHuman
resources demand: The organization’s projected requirement for human resources11
12 Key Personnel Analyses Conducted by HR Forecasters

Specialist/technical/professional personnelEmployment equity-designated group
membershipManagerial and executive personnelRecruits12
13 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.13
14 5 Stages of the Forecasting Process

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.14
15 Organizational Factors Affecting HR Forecasting

Corporate mission, strategic goalsOperational goals, production budgetsHR policiesOrganizational
structure, restructuringWorker KSAOs, competencies, expectationsHRMS level of
developmentOrganizational culture, climate, job satisfaction, communicationsJob analysis:
Workforce coverage, current data15
16 HR Forecasting Time Horizons

Current forecast: Up to one yearShort-run forecast: From one to two yearsMedium-run forecast:
From two to five yearsLong-run forecast: For five or more years©Kartouchken/Shutterstock16
17 Outcomes of ForecastsPrediction: A single numerical estimate of HR requirements associated

with a specific time horizon and set of assumptionsProjection: Incorporates several HR estimates
based on a variety of assumptionsEnvelope: 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 future17
18 Outcomes of ForecastsScenario: A proposed sequence of events with its own set of

assumptions and associated program detailsContingency 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 plan18
19 Steps in Determining Net HR Requirements

Determine HR demandAscertain HR supply (includes internal supply and external supply) and skills
inventory-personal database record on each employeeDetermine NET HR requirementsInstitute HR
programs: HR shortage and HR surplus19
20 HR Shortage or Surplus HR shortage: Demand > Supply

HR surplus: Supply > Demand20
21 Dealing with Surpluses
Job sharing: Occurs when two or more employees perform the duties of one full-time
positionAttrition: The process of reducing an HR surplus by allowing the size of the workforce to
decline naturallyHiring freeze: A prohibition on all external recruiting activities21
22 Dealing with Shortages

External Recruitment: Finding employees from outside the organization22
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The HR Forecasting Process

Chapter 5The HR Forecasting Process

6 Why Is Strategic HR Planning Important to Organizations?

7 Why Is Strategic HR Planning Important to Organizations?

8 Forecasting Activity Categories

Event-based forecasting: Concerned with changes in the external environmentProcess-based

Increases organizational flexibility

Ensures a close linkage to the macro business forecasting process9

11 Human Resources Supply and Demand

12 Key Personnel Analyses Conducted by HR Forecasters

13 5 Stages of the Forecasting Process

14 5 Stages of the Forecasting Process

15 Organizational Factors Affecting HR Forecasting

16 HR Forecasting Time Horizons

17 Outcomes of ForecastsPrediction: A single numerical estimate of HR requirements associated

18 Outcomes of ForecastsScenario: A proposed sequence of events with its own set of

19 Steps in Determining Net HR Requirements

20 HR Shortage or Surplus HR shortage: Demand > Supply

22 Dealing with Shortages

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