BM 3208 1

HUMAN RESOURCE
PLANNING

Chapter 3

FORECASTING HR
REQUIREMENTS
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Human resource forecasting

 HR forecasting is the heart of the HR planning process by ascertaining 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
organizations managers
 Event-based forecasting - concern with changes in the external environment
 Process-based forecasting - not focused on a specific internal organizational event but on the
flow or sequencing of several work activities
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 All Three Of These Categories Are Important To Have A Comprehensive Method For
Ascertaining HR Requirements. This Is Only An Approximation Which Strongly Favors
Quantitative Techniques.
 The Most Successful Hr Forecasting Processes Use Both Qualitative And Quantitative
Data, As The Accuracy Has Proven To Be Substantially Higher (P. 143-144
Belcourt/Mcbey)
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
 Key Personnel Analyses Conducted By HR Forecasters
1. Specialist/ Technical / Professional Personnel
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2. Employment Equity-designated Group Membership
3. Managerial And Executive Personnel
4. Recruits
Forecasting Process
5 Stages Of The Forecasting Process
[Link] Organizational Goals, Objectives, And Plans
[Link] Overall Demand Requirements For Personnel
[Link] In-house Skills And Other Internal Supply Characteristics
[Link] The Net Demand Requirements That Must Be Met From External,
Environmental Supply Sources
[Link] HR Plans And Programs To Ensure That The Right People Are In The Right Place
External Factors Affecting HR Forecasting

1) Environmental Factors Affecting The HR Process5

Include:
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
2) 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 One Being Used To Meet The 6
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: 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, One That Identifies
Requirements For Two To Five Years Into The Future.
 Long-run Forecast: 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.
 The Outcome Of Forecasts Derived From These Four Time
Horizons Leads To Predictions And Projections 7
 Prediction: A Single Numerical Estimate Of HR
Requirements Associated With A Specific Time Horizon And
Set Of Assumptions.
 Projection: Several Hr Estimates Based On A Variety Of
Assumptions
 Determining Net HR Requirements
1. Determine HR Demand: 8
 Each Organizational Subunit Has To Submit Net Personal Requirements To
The Corporate Forecasting Unit, Based On Future Needs For Labor
Required To Meet Agreed-on Objectives (E.G., Market Share/Production
Level). HR Demand Figure Must Include Individuals Needed To
Maintain/Replace Personnel Who Retire/Die/Fired/Terminated/Long Term
Care, Replacements For Those Who Are Promoted/Transferred.
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 This Sub-unit Labour Demands Are Then Aggregated And Used As Starting
Point For HR Demand Forecasts.
 Planned Future Changes In Organizational Design Or Restructuring Issues That
Can Make Fluctuation In Staffing Levels Must Be Incorporated Into The
Equation To Revise Aggregated New Departmental Demand Requirements
 Conduct A Cost Estimate (HR Budget) For The Net HR Demand Figure To
Determine If Forecasts Are Realistic Under Given Financial Considerations.
2. Ascertain HR Supply
 Internal Supply --> Current Members Of The Organizational Workforce Who
Can Be Retained, Promoted, Transferred, To Fill Anticipated HR Requirements
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 External Supply --> Potential Employees Who Are Currently Undergoing Training,
Working For Competitors, Members Of Unions Of Professional Associations, Or
Currently Are In A Transitional Stage Between Jobs Or Unemployment.
There Are Several Reasons Many Organizations Use External Labor To Meet Their Hr
Demand:
 When Their Internal Searches And Job Posting Process Fails To Identify Sufficient
Numbers Of High-quality Internal Candidates
 Focus Is On Expansion In Terms Of Quantity In Stead Of Labour Efficiency, Labor-
saving Technology.
 Internal Employees May Be Comfortable With The Status Quo, Whereas External
Applicants Can Introduce The Organization To Competitive Insights And Creative
Operational Techniques
 An Internal Candidate May Be Considered More Expensive Than An External Candidate
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 The Use Of Headhunters May Enable The Organization To Lure Away From Competitive
Firms Proven High Performers
 If Organizational Objectives Require A Shift In Operating Techniques, Culture, And Past
Practices, Hiring External Candidates Is Often Desirable For Shaking Up The Organization.
Other Considerations– Hr Policies, Proper Communication, Appropriate Media, Etc.
Determine Net Hr Requirements
HR Demand= External Supply+ Internal Supply
External Supply= HR Demand-internal Supply
External Supply Requirements = Replacement + Change Supply Components
Here, Change Supply = Hiring To Increase (Or Decrease) The Overall Staffing Level
Replacement Supply= Hiring To Replace All Normal Losses
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External Supply = Current Workforce Size X (Replacement % Per Year + Change % Per
Year)
Example: Current Workforce Size 1000 Workers, An Annual Historical
Replacement/Loss Rate Of 11%, And A Desired Future Growth Of 7%.
External Supply = 1000 (.11 + .07)
= 110 + 70
= 180
*110 New Hires To Replace Departing Workers And 70 Workers Are Required For New
Growth.
Institute Hr Programs
 HR Deficit And HR Surplus
HR Deficit --> Occurs When Demand For HR Exceeds The Current Personnel
Resources Available In The Organization's Workforce (HR Internal Supply)
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HR Surplus --> Occurs When The Internal Workforce Supply Exceeds The
Organization's Requirement Or Demand For Personnel
When An HR Surplus Exists
 Employees Might Be Laid Off
 Employers Might Terminate Employees If Certain Jobs Are Deemed
Redundant
 Job Sharing: When Two Or More Employees Perform The Duties Of
One Full-time Position, Each Sharing The Work Activities On A Part-
time Basis.
 Organizations Can Lends Some Of Its Excess Workforce To
Community Groups Or Permit Those Surplus Workers To Take
Educational Leave Or Training Away From The Operational Workplace
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 Attrition Is The Process Of Reducing An HR Surplus By Allowing The Size Of
The Workforce To Decline Naturally Due To The Normal Pattern Of Losses
Associated With Retirements, Deaths, Voluntary Turnover, And So On.
 A Hiring Freeze Is A Prohibition On All External Recruiting Activities
When An HR Deficit Exists
 Offer Existing Employees The Opportunity To Work Overtime.
 The Hiring Of Part-time And Full-time Employees.
 The Use Of Temporary Employment Agencies And Contract Workers.
 Transfers And Promotions Of Existing Employees Into Areas Of The Business
That Are Experiencing A
Shortage
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2nd Chapter - Succession Management
 Succession Management Refers Too The Process Of Ensuring That Pools Of
Skilled Employees Are Trained And Available To Meet The Strategic Objectives
Of The Organization.
 This Is A Process Of Identifying Employees Who Have The Potential To Assume
Key Positions In The Organization And Preparing Them For Those Positions.
Reasons For Succession Management
1. Provide Increased Opportunities For High-potential Workers.
2. Identify Replacement Needs As A Means Of Targeting Necessary Training,
Employee Education, And Employee Development.
3. Increase The Talent Pool Of Promotable Employees.
4. Contribute To Implementing The Organization’s Strategic Business Plans.
5. Help Individuals Realize Their Career Plans Within The Organization.
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6. Tap The Potential For Intellectual Capital In The Organization.
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7. Encourage The Advancement Of Diverse Groups.
8. Improve The Employee’s Ability To Respond To Changing Environmental Demands.
9. Improve Employee Morale.
10. Cope With The Effects Of Voluntary Separation Programs.
11. Decide With Workers Can Be Terminated Without Damage To The Organization.
12. Cope With The Effects Of Downsizing.
13. Reduce Headcount To Essential Workers Only.

Evolution Of Succession Management

 Replacement Planning Can Be Defined As The Process Of Finding Replacement
Employees For Key Managerial Positions: If The CEO Dies, Who Will Be Prepared To
Take Over That Position?
 Formal And Methodical Replacement Planning Has Existed Over 30 Years.
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This Section Shows How Replacement Planning Has Evolved Into Succession
Management By-
 Broadening The Focus,
 Expanding The Time Horizon,
 Creating A Talent Pool Of Replacements, And
 Improving The Evaluation System.
Succession Management Process
1. Align Succession Management Plans With Strategy.
2. Identify The Skills And Competencies Needed To Meet Strategic Objectives.
3. Identify High Potential Employees
4. Provide Developmental Opportunities And Experiences.
5. Monitor Succession Management
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1) Align Succession Management Plans With Strategy
Management Development Has To Be Linked To Business Plans And Strategies. If The
Business Plan Focuses On Global Markets, Then Managers Have To Be Trained To Manage
Global Businesses.
The Strategic Connection Is Important, So Organizations Must Start With The Business Plan.
Coupled With Environmental Scanning, Managers Try To Predict Where The Organization
Will Be In Three To Five To Ten Years.
 Identify The Skills And Competencies Needed To Meet Strategic Objectives.
2) There Are Al Least Two Approaches To Identify Characteristics Of Successful
Managers:
 Job-based Approach
 Competency-based Approach
 3) Identify High Potential Employees 1
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Organizations Use Several Approaches To Identify Managerial Talent, Including The Following:
 Temporary Replacements
 Replacement Charts
 Strategic Replacement
 Talent Management Culture
4) Provide Developmental Opportunities And Experiences.
We Should First Consider Two Issues:
 Are Leaders Born Or Made?
 Should Organizations Produce Their Own Managerial Talent Or Buy It On The Open Market?

Management Development Methods: Promotions, Job Rotations, Special Assignments, Formal Training
And Development, Mentoring And Coaching.
Employee Role In Succession Management
By Creating A Process That Invites Employee Participation, Succession Managers Are More Likely To
Gain Employee Commitment To And Ownership Of The Plans
 Abstract - Qualitative Forecasting Techniques
1. Technique: Nominal Group
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Description: A Group Of Four Or Five Participants Is Asked To Present Their 0
Views
Regarding Labor Forecasts. These Views Are Written Down, With No Discussion Until
All Of The Members Have Advanced Their Positions. The Group Then Discusses The
Information Presented And Subsequently, A Final Ballot Is Taken To Determine Its
Judgment.
2. Delphi Technique: This Technique Calls For A Facilitator To Solicit And Collate
Written, Expert Opinions On Labor Forecasts. After Answers Are Received A Summary
Of The Information Is Developed And Distributed To The Experts, Who Are Then
Requested To Submit Revised Forecasts. Experts Never Meet Face-to-face, But Rather
Communicate Through The Facilitator.
3. Replacement Planning: Forecasting Estimates Are Based On Charting Techniques, Which
Identify Current Job Incumbents And Relevant Information About Each Of Them. This
Information Typically Includes A Brief Assessment Of Performance And Potential Age
Length Of Time In Current Position, And Overall Length Of Service.
4. Allocation Planning: This Involves Judgments About Labor Supply Or Demand By
Observing The Movement Of Employees Through Positions At The Same
Organizational Level.
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Quantitative Forecasting Techniques:
1. Regression Model: Fluctuations In Labor Levels Are Projected Using Relevant Variables
Such As Sales.
2. Time Series Model: Fluctuations In Labor Levels Are Projected By Isolating Trend,
Seasonal, Cyclical And Irregular Effects.
3. Economic Model: Fluctuations In Labor Levels Are Projected Using A Specified Form Of
The Production Function.
4. Linear Programming Model: Fluctuations In Labor Levels Are Analyzed Using An
Objective Function As Well As Organizational And Environmental Constraints.
5. Markov Model: Fluctuations In Labor Levels Are Projected Using Historical Transition
Rates.
 Miles And Snow Typology And Forecasting 2
2 Snow
According To The Research Conducted By Doty Et Al.(1993), The Miles And
Typology Is The Best Orga-on Typology That Orga-on Can Use To Categorize
Their Strategy, Structure And Process. It Appears To Be Particularly Well Suited
For The Analysis Of HRM Functions. Indeed, This One Reason Why Olian And
Rynes(1984) Used It In Their Study Of Orga-al Staffing. Moreover, As Table 1
Indicates, Miles And Snow(1984) Specifically Addressed The Importance Of
Fitting Orga-al Type With The Appropriate HR System.
HR systems Defender Prospector Analyzer
Basic Strategy Building Acquiring Allocating
2
Human human Human3
resources resources resources

Recruiting and Little Sophisticated Mixed

selection recruiting recruiting at all recruiting and
above entry levels; selection
level; selection selection based approaches
based on low on high cost
cost devices devices
Training and Skill building Limited Mixed T & D
development and training training approaches
programs programs
HR systems Defender Prospector Analyzer

Performance Process oriented(e.g. Results 2

Mixed
appraisal critical incidents or oriented(e.g. 4
performan
production targets); MBO or profit ce
individual/group targets); appraisal
performance division/corp. approaches
evaluations; time-series performance
comparison(e.g. evaluations;
previous years cross-sectional
performance) comparisons(e.g.
other companies
during same
period
Compensation Oriented toward Oriented toward Mixed
position in performance; compensati
organization; internal external on
consistency competitiveness approaches