HUMAN RESOURCE

DEMAND FORECAST
 Employees required for a future plan
period is a function of the estimated
sales revenue (or production estimate)
for that period and the productivity
goal.
 Current year Plan Year Estimate Plan Year Estimate

No Change in 7% improvement in
Productivity Productivity

Revenue Rs. 120 million Rs. 150 million Rs. 150 million

Present No. of 857

Employees

Productivity Rs. 1,40,000 Rs. 1,40,000 Rs. 1,49,600

(Revenue per
employee)
Employees 1071 1001
Required
 . Productivity was determined by dividing
Rs. 120 million by the current work force,
i.e. 857 employees, to get a revenue of
Rs.1,40,000 per person.
 Year one, only revenue forecast with no
change in productivity. Therefore, in order
to realize increased revenues, given the
current productivity levels of employees,,
the company will have to employ a total of
1071 people, i.e. 214 more employees will
have to be recruited
 Forecast 2 calls for increase in revenue and
an increase in productivity (7%). This
means employee productivity will be (Rs.
140000x107% = Rs. 1,49,800 per
employee). With improved productivity, no.
of employees required will be Rs. 150
million /Rs. 149,800 = 1001. This is 70
people less than without productivity
improvements
 Suppose The average wage bill (pay
plus benefits) per employee is Rs.
20000, then the savings generated by
productivity improvement will come to
Rs. 1.4 million (Rs. 20,000 x 70).
 5 Basic Strategies to Improve Productivity

HR Focus

1 Increase output faster than inputs Increase sales or production faster than
adding employees or person-hours

2 Increase output while holding input Increase sales or production, while

stable keeping the workforce nos. constant; no
net additions to staff; replace exits

3. Decrease inputs faster than output In a declining situation reduce the work
force faster than the decline in
production or sales revenues
4. Maintain output with reduced inputs Maintain sales or production with fewer
employees
5. Increase output with reduced inputs Improve sales and production with a
reduced workforce
 Productivity Important for HRM.
 Productivity goal plays a key role in
determining no. of employees required.
 Productivity is directly linked to achieving
org. goals.
 Helps focus HR attempts/programs

A Labor Problem?!

To be Skilled or
Professional??
 The Background
A garment export factory has signed a
multi-year contract with an American
retailer to produce X dresses each day at
$10 per dress; this is the factory’s only
output. The factory employs workers
who each use a sewing machine. The
current sewing machines can be rented
for $7 per day.
The Problem
If “skilled” workers are hired each
can produce 5 dresses per 8-hour
day.These workers are paid $4 per
hour. If “professional” workers are
used, each of whom is paid $6 per
hour, 7 dresses per day per worker
can be produced.

Which kind of labor should be used?

 Skilled Or Professional?!
Common Sense – Use the
Professional!!
Right?!

WRONG?!

Never forget the BOTTOMLINE –

PRODUCTIVITY & PROFIT
 The Solution
Worker Revenue Labour Labour Sewing Total Profit per
Type per day used per Cost per m/c cost Cost per day
day day per day day

Skilled 10X X/5 $4per hr $7 x X/5 ($32 x $10X -

Worker x 8 hrs = X/5) + ($7 $6.4X
$32.00 x X/5) - $1.4X =
per day $2.20X
 

      $6 per hr   ($48 x $10X -

Professio 10X X/7 x 8 hrs = $7x X/7 X/7) + (7 $6.86X –
nal $48 per x X/7) $X =
Worker day $2.14X
 
 SKILLS MATRIX

Current Year Plan Year Forecast

Workforce Number Percent Expected Percent

Category Number
Total Employees 857 100% 1000 100%

General 8 1% 10 1
Managers
Managers/Super 128 15% 150 15%
visors
Engineers/Tech 214 25% 250 25%
nicians
Office Personnel 86 10% 100 10%

Production/Mai 250 29% 290 29%

ntenance
 Difficult to forecast. Strategy is to simply use the
same distribution of skills as existing in current
period.
 Some estimate support staff needs as a function of
the no. of critical skills required. E.g. where
engineering talent is critical, the no. of engineers
required becomes the determinant of the level of
clerical, accounting and other support personnel.
E.g. ratio may be 1 support employee for every 20
engineers.
