HR FORECASTING PROCESS
Delivered by
Dr. Pratyush Banerjee
WHAT IS HR FORECASTING?
The process of ascertaining the net requirement for
personnel by determining the demand for and supply of
human resources at present and in future.
SCHEMATIC PROCESS SHOWING HR DEMAND
AND SUPPY FORECASTING STEPS
TYPES OF FORECASTING
Transaction based forecasting- tracking internal
change implemented by organization’s managers (Eg:
Succession planning forecasts)
Event-based forecasting- concerned with change in
external environment (Eg: Recession)
Process-based forecasting- focused on the flow or
sequence of several inter-connected work activities (Eg:
shift-based demand forecasts)
RATIONALE FOR CONDUCTING HR
FORECASTING
Reduce hiring cycle costs
Increase organizational flexibility
Ensures a close linkage to macro business forecasting
process
Ensures that org. requirements take precedence over
issues of resource constraint and scarcity
KEY AREAS OF ANALYSIS
Identifying high level talent in and outside the firm
Identifying areas of employee inequity
Managerial and executive development
Recruitment decisions
ENVIRONMENTAL FACTORS AFFECTING
HR FORECASTING
Forecasting time
horizons
Current forecast
Short-run forecast
Medium-run forecast
Long-run forecast
Source: Klatt, L. A., Murdick, R. G., & Schuster, F. E. (1985). Human resource management. Charles
E. Merrill Publishing, Ohio. Lau, RSM and Bruce, EM (1998),“A Win-Win Paradigm for Quality of
Work Life and Business Performance”, Human Resource Development Quarterly, 9(3), 211-226.
A FEW KEY TERMS
Prediction- a single numerical estimate of HR
requirements associated with a specific time horizon
with respect to a specific assumption
Projection- several estimates on variety of assumptions
Scenario- multiple projections/ sequence of events with
their unique assumptions
MAJOR CONSIDERATIONS FOR
DETERMINING NET HR REQUIREMENTS
Demand Forecasting – shortage of employees (internal & external)
Supply forecasting – Surplus of employees
FACTORS TO BE CONSIDERED FOR
DETERMINING HR DEMAND
Net personnel requirement report from sub-units
Report on planned organizational changes to be made
available
Determining how to utilize non-productive paid time
Estimation of HR Budget
FACTORS TO BE CONSIDERED FOR
DETERMINING HR SUPPLY
Ascertaining supply options- internal and external
Identifying the need and aligning with available options
Select forecasting models- time series, causal and
judgmental
HOW TOUGH IS IT TO PREDICT FUTURE
LABOR REQUIREMENTS?
Type of labor transition Degree of difficulty in predicting
Retirements Easiest
Firing / dismissals Medium
Transfers Medium
Layoffs Medium
Sabbaticals / Lien Medium
Voluntary attrition High
Absence due to illness / High
pregnancy
Death High
DETERMINING NET HR REQUIREMENTS
External supply requirements= replacement + change
supply components
Where
replacement= hiring to replace all normal losses and transfers
(such as voluntary turnover, retirement, contract lapse etc.)
And
change supply= increase/ decrease in overall staffing level
such as expansion / retrenchment policies
EQUATION:
EXTERNAL SUPPLY = Current workforce size X [historical
replacement rate (%) + change (growth/downsize) % per yr]
EXERCISE
Polycon Industries is a mid-sized manufacturing firm
The HR manager of the firm wants to predict external
labor flow for the coming yar 2021
The current employee strength of Polycon is 400.
The historical attrition rate of the firm is 15% per year.
The firm also plans to expand its employee capacity by
10% of its existing capacity in 2021 to enhance the
production capacity.
What additional labor is required to be hired to meet the
required manpower demand?
SOLUTION
EXTERNAL SUPPLY = 400 X [0.15+0.1]
= 400 X 0.25
= 100
(60 people will leave the job + 40 additional recruits will
have to join)
EXERCISE 1
Current workforce size = 1000
Annual historic replacement rate = 11%
Desired future growth rate = 7%
Net External supply requirement = ?
EXERCISE 2
One firm has workforce of 450. The historical annual
attrition rate is 8 % and the firm is planning to downsize
next year by 9.5%.
What is the net external supply needed/surplus expected
for next year for this firm?
CHOOSING APPROPRIATE STRATEGIES
FOR HR SHORTAGE
HR Shortage HR Demand> HR internal supply
Appropriate strategies
Overtime
External recruitment & selection
Part-time and contractual hiring
Freelance hiring
Recalling laid-off workers
Recalling/ enticing retired workers to join (re-
recruitment)
Job sharing
CHOOSING APPROPRIATE STRATEGIES
FOR HR SURPLUS
HR Surplus HR Demand< HR internal supply
Appropriate strategies
Job sharing
Work sharing
Attrition
Outplacement
Loaning
Hiring freeze
VRS
Expatriate assignments
Punishment transfer
THANK YOU