Human Resource Forecasting

We know that managing a successful large business involves acquiring, developing and maintaining a wide range of resources. These resources include materials, buildings, land, equipment, technology and, crucially, people. In the age of competition, market is highly dynamic and customers look for the best deals and are increasingly prepared to switch to the competitors. So, companies do not have any other choice than to compete better than their competitors. Human resource management has a critical role to play in supporting the corporate strategic plan. All the HR functions contribute positively to achieving the objective. The main task of human resource management is to support other departments to have the best people. Therefore, there is a critical need to get the best people in the right place at the right time. Forecasting helps to match the requirements and the availabilities of employees which is basically an estimation of the number (quantity) and kind (quality) of employees the organization will need at future dates to meet its objectives. Forecasting is based on information from the past and the present to identify expected future conditions. Such information may come from external environmental scanning and/or the assessment of internal strengths and weaknesses.

So, there are two kinds of forecasting methods: qualitative and quantitative methods

Choice of a forecasting technique:

Forecasters can choose either the qualitative or quantitative techniques. Also, they can combine them. The assumption is that a pattern exists concerning the predictors of labor supply or demand. In choosing a forecasting technique, the following factors should be considered. 1. Organization's environment. Jackson and Schuler (1990: 22) observe that organizations operating in fairly stable environments may be able "to quantify the expected values of variables in their models, which means they can use statistical forecasting models." Conversely, for firms operating in unstable environments, quantitatively based predictions are likely to be highly

tentative, since "both the variables and their expected values are difficult to specify accurately by replying on historical data". 2. Organization size. Stone and Fiorito (1986) suggest that larger organizations tend to use more sophisticated, quantitative techniques than do smaller ones. According to them, this relationship is particularly strong among government, mining, forestry, transportation, communications, and utilities organizations, which traditionally have had high internal stability due to low turnover among their employees (Duane, 1996:13). 3. Perceived uncertainty in labor markets and economy. In particular, "more sophisticated techniques will be discontinued if perceived uncertainty increases to a point where techniques are no longer feasible, or if perceived uncertainty decreases to a point where techniques are no longer needed" (Stone and Fiorito, 1986: 639; Rowland and Summers, 1983). 4. Competition. Organizations in industries that are regulated, operate within predictable product markets, and acquire resource slack tend to use similar forecasting techniques (Doeringer et al., 1968; Fiorito et al., 1985; Moore and Reichert, 1983; Vatter, 1967). In sum, these factors suggest that different types of organizations must approach it differently.

    

Seasonal Fluctuations Interest Rate Currency Exchange Rate Industry and Economy Pattern of Consumer Spending

Methods used for demand forecasting

Qualitative:

Subjective techniques rely heavily on qualitative information supplied by managers, supervisors, human resource planners, and others to develop an estimation of personnel needs.

Managerial Estimates/ Expert Forecast: Bottom up approach. Each unit manager makes an estimate of human resource needs for the period of time encompassed by the planning cycle. As the process moves upward in the company, each successively higher level of management in turn makes its own estimates of needs, incorporating the input from each of the immediately preceding levels. The result, ultimately, is an aggregate forecast of needs of the entire organization. The interactive aspect of managerial estimating is one of the advantages of this procedure. Other experts used include: Organizations HR & business planning staff Business consultants, financial analysts, university researcher, union members, industry spokespersons Government officials

Quantitative/Statistical Techniques: Quantitative approaches utilize mathematical procedures to predict requirements.

Trend Analysis:

Use past employment patterns to predict future needs For e.g. if a company has been growing 5% annually for the last eight years, it might assume that it will experience the same growth in the coming year.

Methods used for supply forecasting

Once human resources needs have been identified, the availability must be checked. The forecast of the availability of human resources is considering both internal and external supplies. Internally, succession plans developed to identify potential personnel changes, due to promotion, retirement, resignation, etc for each department in an organization are examined. By the end of this analysis, the organization is able to know if there are employees to cover future demand from within its resources. Externally, there are many factors, such as the labor-force population estimates, trends in the industry, technological developments and shirts. The organization must take such factors into consideration to be able to know if ideal candidates can be located.

Two types of forecasting:

Judgmental / Qualitative: Judgmental treat employees as individuals and forecast their movements person by person.

Skill Inventories:

Information maintained on non-managerial employees about their availability and preparedness to move into higher or lateral positions. Purpose is to enable the organization to readily determine which employees maybe shifted. Data maintained include:         Educational background Work experience Work skills Licenses or certifications held Biographical data Previous performance appraisal Training programs attended (internal and external) Career goals and aspirations

Managerial Inventories:

Collection of data that is used in determining the potential of present managers to progress to positions of greater responsibility. It differs from skills inventory in the amount and details of information maintained. Data maintained include:             Work history Educational background Assessment of strengths and weaknesses Development needs Promotion potential Current job performance Field of specialization Job preference Geographical preference Career goals and aspirations Anticipated retirement date Personal history

Replacement planning:

Focus on the identification of individual employees who will be considered promotion candidates, along with thorough assessment of their current performance. Replacement planning precedes succession planning. The charts from replacement planning could be aggregated across the organization to provide a corporate composite of talent availability.

Succession Planning: Build upon replacement plans and directly tie to leadership development. Ensures that candidates for promotion have the specific KSAOs and general competencies required for success on the new job. Assesses each promotable employee for KSAO or competency gaps and where there are gaps, creates employee training and development plans that will close those gaps.

Statistical / Quantitative: Statistical technique treats employees as numbers and forecast their movements based on probabilities.

Vacancy Analysis: Also known as sequencing model analyzes flows of personnel throughout the organization by examining inputs and outputs at each hierarchical or compensation level

Equating Demand to Supply:

The first 2 phases of HRP are analytical & conceptual and the third phase is action oriented. Only in very small firms operating in stable environment that demand equals supply. In reality it is very rare. No action is needed to be taken in that case rather maintaining that status and standard is sufficient. But most of the time various steps are taken to obtain a balance between the number and kind of employees needed & the number and kind available as there remains gap between demand and supply

Conclusion

Forecasting has an important role in successful human resource management of a company. By predicting the number of employees to be hired and also by estimating and knowing their quality, a company would get the best people for the right places and at the right time. This is necessary if a company wants to compete in the global market.

Reference:
Considering these factors, that is, organizations environment and size, perceived uncertainty in labor markets and economy, and competition, the Miles and Snow typology can be used to determine appropriate forecasting techniques in an organization. Regression analysis