EMPLOYMENT PLANNING AND FORECASTING

The basic purpose of having a human resource plan is to have an accurate estimate of the number
of employees required, with matching skill requirements to meet organisational objectives. It
provides information about the manner in which existing personnel are employed, the kind of
skills required for different categories of jobs and human resource requirements over a period of
time in relation to organisational objectives. It would also give an indication of the lead time that
is available to select and train the required number of additional manpower.

More specifically, HR planning is required to meet the following objectives:

i. Forecast personnel requirements: HR planning is essential to determine the future manpower

needs in an organisation. In the absence of such a plan, it would be difficult to have the services
of right kind of people at the right time.

ii. Cope with changes: HR planning is required to cope with changes in market conditions,
technology, products and government regulations in an effective way. These changes may often
require the services of people with the requisite technical knowledge and training. In the absence
of an HR plan, we may not be in a position to enlist their services in time.

iii. Use existing manpower productively: By keeping an inventory of existing personnel in an

enterprise by skill, level, training, educational qualifications, work experience, it will be possible
to utilise the existing resources more usefully in relation to the job requirements. This also helps
in decreasing wage and salary costs in the long run.

iv. Promote employees in a systematic manner: HR planning provides useful information on the
basis of which management decides on the promotion of eligible personnel in the organisation.
In the absence of an HR plan, it may be difficult to ensure regular promotions to competent
people on a justifiable basis.

Human-resources departments plan for future staffing requirements based on the forecasting of
positions the company must fill to meet future needs. Forecasts are based on the estimated demands
for products and services. Therefore, revenues are determined first and staffing plans developed
accordingly. Forecasts of demand are calculated based on company-wide needs or individual units.
Three possible areas to forecast are anticipated personnel headcount, the present supply of internal
candidates and the supply of external candidates.

Personnel Needs

Trend analysis is used to review the past employment needs to predict future needs. There are
two ways used most frequently in trend analysis. The first is computing the number of employees
at the end of a certain number of years. The second way is the number of employees in a certain
function (i.e. sales, marketing, human resources, finance and administrative). Sometimes, it is
best to use both methods to cover all bases.
Present Supply of Internal Candidates

Qualification inventories are one way of forecasting inside candidates. A list of employees, their
education, any internal training, special skills, and succession planning for promotion is
beneficial to the future planning. A second method is referred to as personnel replacement. This
is defined as the employee's present performance and the desire for promotion to additional
positions based on performance, skills and experience.

Future Supply of External Candidates

There are numerous factors to consider for external candidates. They include the geographic area
of the company, potential candidates graduating from high school or college, individuals entering
or leaving the workforce, the level of skills and experience required to perform the internal jobs
and the competing employers for the same skill set. This information is beneficial in determining
competitive benefits and salary offerings.

Researching Internal and External Staffing Resources

Obtaining candidates to meet future needs is an important part of the forecasting process.
Internal postings can build morale as employees appreciate the opportunity to move up in the
organization. Employee-referral programs can be beneficial in bringing qualified people into the
organization. Top performers tend to know other top performers, and a cash award is motivation
to present employees to recommend these qualified candidates. Other external-staffing resources
include temporary agencies, colleges, job boards and social-networking sites.

Forecasting Personnel Needs

(Labor Demand)

Forecasting Personnel Needs (Labor Demand). How many people with what skills will we need?
Managers consider several factors.
For example, when Dan Hilbert took over staffing at Valero Energy, he reviewed Valero’s
projected retirements, growth plans, and turnover history. He discovered that projected
employment shortfalls were four times more than Valero could fill with its current recruitment
procedures. He formulated new personnel plans for boosting employee retention and recruiting
and screening more candidates

A firm’s future staffing needs reflect demand for its products or services, adjusted for changes
the firm plans to make in its strategic goals and for changes in its turnover rate and productivity.
Forecasting workforce demand therefore starts with estimating what the demand will be for your
products or services.

Short term, management should be concerned with daily, weekly, and seasonal forecasts. For
example, retailers

track daily sales trends because they know, for instance, that Mother’s Day produces a jump in
business and a need for additional store staff. Seasonal forecasts are critical for retailers
contemplating end-of-year holiday sales, and for many firms such as landscaping and air-
conditioning vendors.

Longer term, managers will follow industry publications and economic forecasts closely, to try
to get a sense for future demand. Such future predictions won’t be precise, but should help you
address the potential changes in demand.

The basic process for forecasting personnel needs is to forecast revenues first. Then estimate the
size of the staff required to support this sales volume.
However, managers must also consider other factors. These include projected turnover, decisions
to upgrade (or downgrade) products or services, productivity changes, financial resources, and
decisions to enter or leave businesses.

The basic tools for projecting personnel needs include trend analysis, ratio analysis, and the
scatter plot.

Trend analysis

means studying variations in the firm’s employment levels over the past few years. For example,
compute the number of employees at the end of each of the last 5 years in each subgroup (like
sales, production, secretarial,
and administrative) to identify trends.

Trend analysis can provide an initial rough estimate of future staffing needs.
However, employment levels rarely depend just on the passage of time. Other factors (like
productivity and retirements, for instance), and changing skill needs will influence impending
workforce needs.

Ratio Analysis
Another simple approach, ratio analysis, means making forecasts based on the historical ratio
between
(1) some causal factor (like sales volume) and
(2) the number of employees required (such as number of salespeople).

For example, suppose a salesperson traditionally generates $500,000 in sales. If the sales revenue
to
salespeople ratio remains the same, you would require six new salespeople next year (each of
whom produces an extra $500,000) to produce a hoped-for extra $3 million in sales.

Like trend analysis, ratio analysis assumes that things like productivity remain about the same. If
sales productivity were to rise or fall, the ratio of sales to salespeople would change.

The scatter plot

Is a graphical method used to help identify the relationship between two variables.

The scatter plot shows graphically how two variables—such as sales and your firm’s staffing
levels—are related. If they are, then if you can forecast the business activity (like sales), you
should also be able to estimate your personnel
needs.

For example, suppose a 500-bed hospital expects to expand to 1,200 beds over the next 5 years.
The human resource director wants to forecast how many registered nurses the hospital will
need. The human resource director realizes she must determine the relationship between hospital
size (in number of beds) and number of nurses required. She calls eight hospitals of various sizes
and finds this:
graph compares hospital size and number of nurses. If the two are related, then the points you
plot (from the data above) will tend to fall on a straight line, as here. If you carefully draw in a
line to minimize the distances between the line and each one of the plotted points, you will be
able to estimate the number of nurses needed for each hospital size. Thus, for a 1,200-bed
hospital, the human resource director would assume she needs about 1,210 nurses.

While simple, tools like scatter plots have drawbacks :

1. Historical sales/personnel relationships assume that the firm’s existing activities and skill
needs will continue as is.
2. They tend to reward managers for adding employees, irrespective of the company’s needs.
3. They tend to institutionalize existing ways of doing things, even in the face of
change.

Computerized systems and Excel spreadsheets help managers translate estimates of projected
productivity and sales levels into forecast-able personnel requirements.

determining the Relationship Between

hospital Size and number of nurses
Managerial Judgement

Few historical trends, ratios, or relationships will continue unchanged into the future. Judgment
is thus needed to adjust the forecast.

Important factors that may modify your initial forecast of personnel requirements include
decisions to upgrade quality or enter into new markets; technological and administrative changes
resulting in increased productivity; and financial resources available, for instance, a projected
budget crunch