Chapter 7 HR Demand

HR demand – the organization’s projected requirement for human resources

Index/Trend Analysis is a relatively straightforward quantitative demand forecasting technique that uses the historical relationship between the operational index (i.e. sales level) and the number of employees required by the organization (demand for labour) to forecast future requirements.

5 steps to conducting an effective index/trend analysis:
1. Select the appropriate business/operational index - The HR forecaster must select a readily available business index, such as sales level, that is (a) known to have a direct influces on the organizational demand for labour, and (b) subjected to future forecasting as a result of the normal business planning process.
2. Track the business index over time - Once the index has been selected, it is necessary to go back in time for at least the four or five most recent years, but preferably for a decade or more, to record the quantitative or numerical levels of the index over time.
3. Track the workforce size over time
4. Calculate the average ratio of the business index to the workforce size
Employment requirement ratio – the relationship between the operational index and the demand for labour
5. Calculate the forecasted demand for labour

Extrapolation-Extending past rates of change into the future.
Indexation-A method of estimating future employment needs by matching employment growth with some index, such as the ratio of production employees to sales.

Expert Forecasts
Input directly from managers is the most commonly used method for determining workforce requirements.
It is a detailed process of stating assumptions, considering potential organizational and environmental changes, and deriving a rationale to support the numerical estimate.
A wide variety of individuals may be considered experts for their knowledge in areas such as:
  • Organizational operations
  • Competitive HR practices
  • International trends in the labour market
Who should be consulted?
  • Front line managers
  • HR and business planning staff
  • Business consultants
  • Financial analysts
  • Industry spokespersons
  • Federal, Provincial and Local government officials

Delphi Technique- a carefully designed program of sequential, individual interrogations (usually conducted through questionnaires) interspersed with information feedback on the opinions expressed by the other participants in previous rounds.

Advantages of the Delphi technique include:
a) since experts don't meet meet, there is no reluctance to participate due to shyness or percieved lower status/authority
b) can draw from a wide geographical area

Steps associated with using the Delphi Technique (6 steps):
1. Define and refine the issue or question - project coordinator is assigned, works with the HR staff to determine the specific personnel category or activity that will be the focus of the Dephi Technique, the group targeted for forecasting must be well defined so relevant, focused and detail feedback can be derived.
2. Identify the experts, terms, and time horizon - a team is selected that are deemed experts with respect to personnel grouping that requires forecast, both parties must meet an agreement on terms and conditions for participation and setting contect and explicity defining nature of the work.
3. Orient the experts - identifying relevant time horizons & clarifying which personnel groups are of interest, overview of the demand farecasting decision process. Experts told either predetermined number of questionnaire or sequence will continue until majority opinion exists.
4. Issue the first round questionnaire - questionnaire sent by courier, fax, email, mail, includes time frame for completion and return. First questionnaire focuses on defining explicit assumptions made by each expert and background rationale supporting particular demand estimate.
5. Issue the first round questionnaire summary and the second round of questionnaires - second subsequent rounds of questionnaire with written summary of findings, aim of second questionnaire focus experts initial assumptions by providing feedback from all members
6. Continue issuing questionnaire - continue issue questionnaire until either all predetermined questionnaire stages been complete and summarized or group reaches a clear majority decision.

Nominal Group Technique
Nominal Group Technique (NGT) – long-run forecasting technique utilizing expert assessments
There are 7 Steps associated with implementing the NGT, they are:
  1. Define and Refine the Issue or Question and the Relevant Time Horizon
  2. Select the Experts
  3. Issue the HR Demand Statement to the Experts
  4. Apply Expert Knowledge, State Assumptions, and Prepare an Estimate
  5. Meet Face-to-Face
  6. Discuss the Demand Estimates and Assumptions
  7. Vote Secretly to Determine the Expert Demand Assessment

Internal supply refers to the current members of the organizational workforce who can be retrained, promoted, transferred,etc to fill anticipated future HR requirements
External supply- potential employees who are currently undergoing training or working for competitors, or who are members of unions or professioanl associations, or currently are in a transitional stage, between jobs or unemployed.

Replacement charts are a visual representation used internally of who will replace whom in the event of a job opening. The information for constructing the chart comes from the human resource audit. The chart depicts the various jobs in the organization and shows the status of likely candidates. Replacement status consists of two variables: present performance and promotability. Present performance is determined largely from supervisory evaluations. Future promotability is based primarlily on present performance and the estimates by immediate superiors of future success in a new job. To supplement the chart--and, increasingly to supplant it--human resources specialists develop replacement summaries. Replacement summaries list likely replacements and their relative strengths and weaknesses for each job.

HR Budgets: Staffing Table
HR Budgets: quantitative, operational, or short-run demand estimates that contain the number and types of personnel (i.e., personnel classes, such as bank clerks, loans officers, and branch managers) required by the organization as a whole and for each subunit, division, or department
Staffing Table: total HR demand requirement for operational or short-run time periods
- HR budgets prepared by the HR staff with line managers
- take into consideration: historical companystaffing trends, competitor staffing practices, industry, professional associations, Statistics Canada
- staffing table contains information related to set of operational assumptions / levels of activity (e.g., maintain the currentorganization structure, increase sales level by a percentage over previous year levels)
- staffing table presents total HR demand requirement, number of personnel required, by level and function

Envelope/Scenario Forecasts:
Projections, or multiple-predictor estimates, of future demand for personnel predicated on a variety of differing assumptions about how future organizational events will unfold.
It entails actually three forecasts: an "optimistic" forecast, a "most likely" forecast and an "adverse" forecast. Each of these forecast has it's own staffing table and allows the organization to be flexible when circumstances change rapidly.
Regression Analysis:
Very effective, quantitative forecasting technique for short-medium and long-range time horizons. Can be easily updated and changed.

Presupposes that a linear relationship exists between one or more independent (causal) variables, which are predicted to affect the dependent (target) variable - in our instance, future HR demand for personnel (i.e.: the number of personnel).

Based on logic similar to that used in trend analysis, regression projects into the future based on the past historical relationship between the independent and dependent variables. Publication regarding Forecasting techniques and the effects of HR demands

February Ontario Market Bulletin Report on second quarter hiring plans