Chapter 5 The HR

Forecasting Process

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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 procedures

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Learning Outcomes

After reading this chapter, you should be able to:

•  Discuss the rationale for giving special attention to specialist, technical, and executive personnel groups in the HR forecasting process

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Learning Outcomes

After reading this chapter, you should be able to:

•  Describe the relevant time periods for future estimates of HR demand and supply.

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Learning Outcomes

After reading this chapter, you should be able to:

•  Identify the various steps in the process of determining net HR requirements and terminology describing types of Outcomes

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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 work

•  Insufficient work and too many employees lead to inefficiencies and lower productivity.

•  Employees may become bored and unmotivated and engage in counterproductive behaviours.

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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.

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Forecasting Activity Categories

There are three forecasting categories: 1.  Transactional-based forecasting:

Focuses on tracking internal change instituted by the organization's managers

2.  Event-based forecasting: Concerned with changes in the external environment

3.  Process-based forecasting: Not focused on a specific internal organization event, but on the flow or sequencing of several work activities

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Benefits of HR Forecasting

1.  Reduces HR costs 2.  Increases organizational flexibility 3.  Ensures a close linkage to the macro

business forecasting process

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Benefits of HR Forecasting

4.  Ensures that organizational requirements take precedence over issues of resource constraint and scarcity (HR Supply and HR Demand)

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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 agencies

Human resources demand: The organization’s projected requirement for human resources

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Key Personnel Analyses Conducted by HR Forecasters

1.  Specialist/technical/professional personnel 2.  Employment equity-designated group

membership 3.  Managerial and executive personnel 4.  Recruits

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5 Stages of the 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.

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5 Stages of the Forecasting Process

4.  Determine the net demand requirements that must be met from external, environmental supply sources.

5.  Develop HR plans and programs to ensure that the right people are in the right place.

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Organizational Factors Affecting HR Forecasting

•  Corporate mission, strategic goals •  Operational goals, production budgets •  HR policies •  Organizational structure, restructuring •  Worker KSAOs, competencies, expectations •  HRMS level of development •  Organizational culture, climate, job satisfaction,

communications •  Job analysis: Workforce coverage, current data

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HR Forecasting Time Horizons

1.  Current forecast: Up to one year

2.  Short-run forecast: From one to two years

3.  Medium-run forecast: From two to five years

4.  Long-run forecast: For five or more years

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Outcomes of Forecasts

Prediction: A single numerical estimate of HR requirements associated with a specific time horizon and set of assumptions

Projection: Incorporates several HR estimates based on a variety of assumptions

Envelope: 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 future

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Outcomes of Forecasts

Scenario: A proposed sequence of events with its own set of assumptions and associated program details

Contingency 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 plan

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Steps in Determining Net HR Requirements

1.  Determine HR demand 2.  Ascertain HR supply (includes internal

supply and external supply) and skills inventory-personal database record on each employee

3.  Determine NET HR requirements 4.  Institute HR programs: HR shortage and HR

surplus

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HR Shortage or Surplus

HR shortage: Demand > Supply

HR surplus: Supply > Demand

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Dealing with Surpluses

Job sharing: Occurs when two or more employees perform the duties of one full-time position

Attrition: The process of reducing an HR surplus by allowing the size of the workforce to decline naturally

Hiring freeze: A prohibition on all external recruiting activities

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Dealing with Shortages

•  External Recruitment: Finding employees from outside the organization

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