CHAPTER 7

HR FORECASTING PROCESS
BY: MONICA BELCOURT
BOOK: STRATEGIC HUMAN RESOURCES PLANNING

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 Q. HR forecasting

HR forecasting constitutes the heart of the HR planning process, and can be

defined as:
◦ ascertaining the net requirement for personnel by determining the
demand for and supply human resources now and in the future.
Main theme of HR forecasting-
◦ Ascertain the net requirement of personnel
◦ Determine the demand for and supply of human resources now and in
future

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 Q. Categories of HR Forecasting

1. Transaction-based forecasting: forecasting that focuses on

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

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 Q. Benefits of HR forecasting

a) Reduces HR costs
b) Increases organizational flexibility.
c) Ensures a close linkage to the macro business forecasting
process.
d) Ensures that organizational requirements take precedence
over issues of resource constraint and scarcity.

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 Q. Key Personnel Analyses Conducted by HR Forecasters.

A. Specialist/technical/professional personnel
B. Employment equity-designated group membership
 Identifiable groups deemed to need special attention; in the case of Bangladeshi
HR these are people of
 indigenous descent
 Women
 people with disabilities and
 members of visible minorities.
C. Managerial and executive personnel
- CEO, President, Vice President
A. Recruits
- New recruits or from the within.
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 Q. Five Stages of HR 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
4. Determine the net demand requirements that must be met
from external environmental supply
5. Develop HR plans to ensure right people are in the right
place.
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 Q. Selected factors affecting the HR Forecasting process
Internal factors External factors
Corporate mission statement, strategic goals Economic situation

Operational goals, production budgets Labor markets and unions

HR policies (compensation, succession) governmental laws and regulations

Organization structure, restructuring, mergers Industry and product life cycles

etc.
Worker KSAs Technological changes

Organizational culture Global market for skilled labor

Job analysis Demographic changes

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Q. HR forecasting time horizons

HR forecasting time horizons are follows :

1) Current forecast: used to meet the immediate operational
needs of the organization. The associated time frame is up
to the end of the current operating cycle, or a maximum
of one year into the future.
2) Short-run forecast: HR requirements for the next one to
two years period beyond the current operational
requirements.

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 HR forecasting time horizons….

3) Medium-run forecast : HR requirements for the next

two to five years period into the future.
4) Long-run forecast: the typical long-run forecast extends
five or more years ahead of the current operational
period.

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 Q. Determine Net HR Requirements

a) Determine HR demand: In determining HR demand, a

variety of factors have to be considered:
a) Market share, production levels , size or expansion etc.
b) Retire, die, terminated or take long- term leave
c) Promoted, transferred .
d) Expansion of certain departments, downsizing of mid-level
management, planned redundancy and elimination of
specific jobs

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 Determine Net HR Requirements……
b) Ascertain HR supply: there are two supply options:
 internal supply: refers to current members of the
organizational workforce who can be retrained, promoted,
transferred, etc. to fill anticipated future HR
requirements.
 external supply: potential employees who are currently
undergoing training or are working for competitors or
who are members of unions or professional associations,
or currently are in a transitional stage, between jobs or
unemployed.

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 Determine Net HR Requirements……

c) Determine Net HR requirements: the third step in the process

involves the determination of net HR requirements . The
following equations are derived:
 HR demand = external supply + internal supply
 External supply requirements = replacement supply +
change supply components (growth or downsize)
 Replacement supply = hiring to replace all normal losses
(Normal losses are those that result from retirements,
terminations, voluntary turnover, promotions, transfers and
leaves)
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 Determine Net HR Requirements……

External supply = current workforce size * ( replacement % per year+

change % per year)
Problem-01 : an organization current workforce size is 1000 workers, an
annual historical replacement OR loss rate of 11% and a desired future
growth rate of 7%, find out the net external supply requirement per year?
◦ External supply = 1000 (.11+.07) =110 + 70 = 180

110 individuals for replacement and 70 individuals for changing

requirements.
net external supply requirement is that 180 individuals be hired per year
◦ * indicates multiplication
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 Determine Net HR Requirements……

Problem-02: An organization’s current workforce is 450 which

has a historical annual replacement OR loss rate of 8% and a
corporate downsizing policy that will reduce overall staffing levels
by 9.5% find out the supply requirements ?
External supply = 450{.08+(-.095)}=36 – 43 = -7

Comment: The result is a net HR surplus

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 Determine Net HR Requirements……
d) Institute HR Programs:
HR deficit = when, HR demand > HR internal supply
Policies to adjust deficit are:
recruitment
 selection
 hire part-time workers
 recall laid workers
recall retired employees
Etc…..
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 Determine Net HR Requirements……

HR surplus = HR demand < HR internal supply

What we have to do :
◦Job sharing: when two or more employees perform the
duties of one full- time position.
◦Attrition: retirements, deaths, voluntary turnover.
◦Hiring freeze: prohibition all external recruiting
activities
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