Website for the Human Resource Planning Society Research
Forecasting human resource requirements Before HR requirements can be projected, demand for the firm’s goods or services must be forecasted. This forecast is then converted into people requirements for the activities necessary to meet this demand. For a firm that manufactures personal computers, activities might be stated in terms of the number of units to be produced, number of sales calls to be made, number of vouchers to be processed, or a variety of other activities. For example, manufacturing 1,000 laptop computers each week might require 10,000 hours of work by assemblers during a 40-hour week. Dividing the 10,000 hours by the 40 hours in the workweek gives 250 assembly workers needed. Similar calculations are performed for the other jobs needed to produce and market the computers.
Several techniques for forecasting HR requirements are currently used. Some of the techniques are qualitative in nature, and others are quantitative.
Zero-Base Forecast The zero-base forecast uses the organization’s current level of employment as the starting point for determining future staffing needs.
Essentially, the same procedure is used for HR planning as for zero-base budgeting, whereby each budget must be justified again each year. If an employee retires, is fired, or leaves the firm for any reason, the position is not automatically filled. Instead, an analysis is made to determine whether the firm can justify filling it. Equal concern is shown for creating new positions when they appear to be needed. The key to zero-base forecasting is a thorough analysis of HR needs. Frequently, the position is not filled and the work is spread out among remaining employees, as often is the case with firms that downsize. Plans may also involve outsourcing or other approaches as an alternative to hiring.
Bottom-Up Forecast In the bottom-up forecast, each successive level in the organization, starting with the lowest, forecasts its requirements, ultimately providing an aggregate forecast of employees needed.
It is based on the reasoning that the manager in each unit is most knowledgeable about employ- ment requirements. Beginning with the lowest-level work units in the organization, each unit man- ager makes an estimate of personnel needs for the period of time encompassed by the planning cycle. As the process moves upward in the company, each successively higher level of management in turn makes its own estimates of needs, incorporating the input from each of the immediately preceding levels. The result, ultimately, is an aggregate forecast of needs for the entire organization. This process is often highly interactive in that estimated requirements from the previous level are discussed, negotiated, and re-estimated with the next level of management as the forecast moves upward through the organization. The interactive aspect of managerial estimating is one of the advantages of this procedure because it forces managers to justify their anticipated staffing needs.
Relationship between Volume of Sales and Number of Workers Required Historically, one of the most useful predictors of employment levels is sales volume. The rela- tionship between demand and the number of employees needed is a positive one. As you can see in Figure 4-3, a firm’s sales volume is depicted on the horizontal axis and the number of employees actually required is shown on the vertical axis. In this illustration, as sales decrease, so does the number of employees. Using such a method, managers can approximate the number of employees required at different demand levels. Quantitative methods such as regression analy- sis can be helpful in determining the number of workers needed.
Forecasting human resource availability To forecast availability, the HR manager looks to both internal sources (current employees) and external sources (the labor market). The determination of whether the firm will be able to secure employees with the necessary skills, and from what sources, is an availability forecast. It helps to show whether the needed employees may be obtained from within the company,
Describe forecasting requirements.
hr Web Wisdom
HR Planning Organization http://www.hrps.org
This is the Web site for the Human Resource Planning Society.
zero-base forecast Forecasting method that uses the organization’s current level of employment as the starting point for determining future staffing needs.
bottom-up forecast Forecasting method in which each successive level in the organization, starting with the lowest, forecasts its requirements, ultimately providing an aggregate forecast of employees needed.
Summarize forecasting human resource availability.
ChaPter 4 • StrategiC Planning, human reSourCe Planning, and Job analySiS 87
from outside the organization, or from a combination of the two sources. Another possibility is that the required skills are not immediately available from any feasible source. Consider the following example:
A large manufacturing firm on the West Coast was preparing to begin operations in a new plant. Analysts had already determined there was a large long-term demand for the new product. Financing was available and equipment was in place. But production did not begin for two years! Management had made a critical mistake: It had studied the demand side of HR but not the supply side. There were not enough qualified workers in the local labor mar- ket to operate the new plant. New workers had to receive extensive training before they could move into the newly created jobs.
This illustration provides one more instance of the importance of HR involvement in strategic planning.
shortage or surplus of Workers Forecasted When firms are faced with a shortage of workers, organizations will have to intensify their efforts to recruit the necessary people to meet the needs of the firm. Some possible actions will be discussed next.
Registered nurses and other health-care occupations are expected to grow rapidly from 2012 to 2022. The employment of registered nurses is expected to grow 19 percent during this period,
Explain what a firm can do when either a shortage or surplus of workers exists.
0 10 20 Sales (thousands)
Figure 4-3 relationship of Sales Volume to number of employees
e t H i c a l D i l e m m a
Which “Thinker” Should Go? Your company is a leading producer of
advanced microchips. You are the chief researcher in your firm’s think tank, which consists of eight people with various specialties. Your group has generated most of the ideas and product innovations that have kept the company an industry leader for 10 years. In fact, the think tank has been so successful that another one has been organized to support the company’s newest manufacturing operation on the West Coast. The individuals included in the new think tank have already been selected, but your boss has just assigned you the task of deciding who from your group of thinkers will head the new organization.
The person best qualified for the job is Tim Matherson. Tim is an MIT graduate, the informal team leader, and the individual who
personally spearheaded three of the team’s five most successful prod- uct advancements. However, if Tim is given the promotion, the void created by his leaving will be difficult to fill. On the other hand, the boss forced his nephew, Robert Jones, into your group. He is a sharp graduate of the local state university, but he is not a team player and he is always trying to push you around. You can either recommend Tim, illustrating that those who produce the most benefit the most, or you can recommend Robert, making the boss happy, getting rid of a problem, and, most important of all, keeping your best performer. 1. What would you do? 2. What factor(s) in this ethical dilemma might influence a person
to make a less-than-ethical decision?
88 Part 2 • Staffing
which is faster than average for all occupations. According the U.S. Labor of Bureau of Statistics, multiple factors are contributing to increased demand for registered nurses:
Demand for healthcare services will increase because of the aging population, since older people typically have more medical problems than younger people. Nurses also will be needed to educate and to care for patients with various chronic conditions, such as arthritis, dementia, diabetes, and obesity. In addition, the number of individuals who have access to healthcare services will increase, as a result of federal health insurance reform. More nurses will be needed to care for these patients.