The Process of Human Resource Planning

Forecasting the Demand for Human Resources

Research Paper (postgraduate) 2010 6 Pages

Business economics - Personnel and Organisation


The Process of Human Resource Planning

As we have already understood the importance of the Human Resource Planning, now we shall look into the processes through which effective Human Resource Planning process is usually carried out in the organisations;

Forecasting the Demand for Human Resources

Forecasting a company’s future demand in human resources is a necessary procedure in light of organizational objectives and strategies.Forecastingis based on information from the past and the presentto identify expected future conditions. Such information may come from external environmental scanning and/or the assessment of internal strengths and weaknesses.

There are different methods forforecastinghuman resources demand that range from a manager’s best guess to a complex computer simulation. While simple assumptions may be sufficient in small-sized companies, complex models that combine subjective judgment and quantitative data are usually necessary for larger organizations.The future demand for employees is calculated on an organization-wide basis; the needs of individual units in the organization are taken into consideration. The HR expert or an experienced manager who handles the forecasting process needs to consider specific openings that are likely to occur and to use such data as the basis for planning. Openings are created when employees leave a position because of promotions, transfers, and terminations. Forecasting leads to projections for the future. Depending on the forecasting method used, the projections may be more or less subject to error.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,successionplans developed to identify potential personnel changes, due topromotion,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 labour-force population estimates, trends in the industry and technological developments. The organization must and they do take such factors into consideration to be able to know if ideal candidates can be located.

In theory or in practice, demand forecasting techniques can be grouped into six major categories:

1. Direct Managerial Input: This is typically done via an edict that headcount or workforce costs will be a specific number. Most often this is expressed as percentage reduction. It involves little analysis of the work effort necessary to meet business objectives. The primary drivers are the desired cash flow and/or adjustments to the company's return ratios such as rate of return, return on capital employed, and discounted cash flow return on investment. This type of approach is easy to calculate and works adequately when a company is substantially overstaffed. The negative is that it is not linked to actual workload requirements and does not distinguish between critical and non-critical skills.

2. Best Guess: A few companies have evolved a Best Guess formalized managerial judgment process. For example, a company formally collects data from each manager and rolls it together for an overall projection. In this process, each manager prepares a forecast of the demand for full-time equivalent employees for the skill groups or job families in their area. The forecast includes;

a. The current headcount requirements.
b. A best-guess estimate of the impact of anticipated productivity and technology changes.
c. The manager's best guess of headcount changes due to anticipated business changes.

Summing the current head-count and the anticipated positive and negative changes yields the future estimate. The strength of this approach is that it provides maximum flexibility to the manager. The major weakness of the best guess approach is that it assumes all managers are willing to spend the time necessary and have the ability to forecast their future work-force needs intuitively.



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forecasting the workforce requirement




Title: The Process of Human Resource Planning