1

Meaning
Process of forecasting a firms future
demand for, and supply of, the right
type of people in the right number
The
process
of
systematically
reviewing HR requirements to ensure
that the required number of employees,
with the required skills, are available
when they are needed

Importance
1. Future Personnel Needs

Surplus/deficiency : Result of absence of

or defective planning
Overstaffing in public and private sector
Voluntary Retirement Scheme (VRS)
Absence of Succession planning

Name of the company

Turnover (Rs. in crore)

Headless for months

State trading corporation

1043

National Airports Authority

293

Indian Airlines

1500

10

Indian Oil Corporation

24,000

Succession Planning
Process of ensuring that qualified
persons are available to assume key
managerial positions once they are
vacant.

Importance
2. Part of strategic planning

Provides inputs for type and number of

people
Resource allocation decisions, including
those pertaining to structure, processes
and human resources

3. Creating highly talented personnel

Cater for job hopping

Succession planning

Importance
4. Foundation for personnel functions

Recruitment, selection, personnel

movement, training and development

5. Increasing investments in human

resources

Factors Affecting HRP

Type and strategy of organization
Organisational growth cycles and planning
Environmental uncertainties
Time horizon
Type and quality of information
Nature of jobs filled
Outsourcing

Human Resource Planning Process

External Environment
Internal Environment

Strategic Planning
Human Resource Planning
Forecasting
Human
Resource
Requirements

Demand =
Supply
No Action

Comparing
Requirements
and Availability
Surplus of
Workers
Restricted Hiring,
Reduced Hours,
Early Retirement,
Layoff, Downsizing

Forecasting
Human Resource
Availability
Shortage of
Workers
Recruitment
Selection

HR Demand Forecast
Process of estimating the future quantity and
quality of people required.
Basis Annual budget and long term
corporate plan
Factors to be considered

External competition, economic climate, law and

regulatory bodies, changes in technology, social
factors
Internal budget constraints, production levels,
new products and services, organizational
structure, employee separation

Forecasting Personnel
Needs
Forecasting
Tools

Ratio Trend
Analysis

Work Study
Technique

Regression
Analysis

HR Demand Forecasting
Techniques
Managerial judgment Managers sit
together, discuss and arrive at a figure.
Ratio-trend analysis Studying past
ratios and forecasting future ratios
making some allowances for changes
in the organisation or its methods

HR Demand Forecasting
Techniques
Regression Analysis Forecast based
on relationship between sales volume
and employee size. Incorporate rate of
change based on historical productivity
improvement trends.

HR Demand Forecasting
Techniques
Work-study technique Can be applied
when work measurement is possible to
calculate the length of operations and
amount of labour required. Eg.
Planned output
Standard hrs per unit
Planned hours for the year
Productive hours per year per man

: 20,000 units
:5
: 1,00,000
: 2,000

(Allowing overtime, absenteeism, idle time)

Number of workers required

: 50

HR Demand Forecasting
Techniques
Delphi Technique Solicits estimates of
personnel needs from group of experts,
usually managers. Once the responses
are summarized and reported back to
experts, they are surveyed again after
they receive feedback until their
opinions begin to agree

Determining the
Relationship Between
Hospital Size and
Number of Nurses

Size of
Hospital
(Number
of Beds)

Number of
Registered
Nurses

200

240

300

260

400

470

500

500

600

620

700

660

800

820

900

860

Drawbacks to Traditional
Forecasting Techniques
They focus on projections and historical
relationships.
They do not consider the impact of strategic
initiatives on future staffing levels.
They support compensation plans that reward
managers for managing larger staffs.
They rely on the idea that staff increases are
inevitable.

Using Computers to Forecast

Personnel Requirements
Computerized Forecasts

Software that estimates future staffing needs

by:

Projecting sales, volume of production, and

personnel required to maintain different volumes of
output.

Forecasting staffing levels for direct labor, indirect

staff, and exempt staff.

Creating metrics for direct labor hours and three

sales projection scenariosminimum, maximum,
and probable.

HR Supply Forecast
Measures the number of people likely
to available from within and outside an
organisation, after making allowance
for absenteeism, internal movements
and promotions, etc.
Supply analysis covers:

Existing human resources

Internal sources of supply
External sources of supply

Forecasting the Supply of

Inside Candidates
Qualification
Inventories

Manual
Systems and
Replacement
Charts

Computerized
Information
Systems

Analysis of present
employees
Skills inventories audit of nonmanagers
Management inventories audit of
managers

Management Replacement Chart Showing

Development Needs of Potential Future Divisional
Vice Presidents

Forecasting Outside
Candidate Supply
Factors In Supply of Outside Candidates

General economic conditions

Expected unemployment rate

Sources of Information

Periodic forecasts in business publications

Economic projections

Taking Action: Reconciling

Supply and Demand
Surplus of workforce

Organizational downsizing & restructuring - Citi

Group
Making layoff decisions
Retrenchment
Voluntary Retirement Scheme
Restrict Hiring
Reduce work hours - Tata Motors
Use slack time for employees training or equipment
maintenance
Transfer out, promotion out, demotion out

Taking Action: Reconciling

Supply and Demand
Deficit

Hire new full time employees

Overtime
Outsource
Business Process Reengineering to reduce
Attempts to reduce labor turnover
Rehire retired employees on a part time basis
Offer incentives for postponing retirement
Hire temporary employees
Training & Development
Transfer in, promotion in, demotion in
Retraining & Redeployment

Measures of Workforce
Turnover
Workforce Turnover
=
No. of employees leaving in a time period /
Average number of those employed during
the period x100

Measures of Workforce
Turnover
Average Number Employed
=
No. of those employed at the start of the
period number employed towards the
end of the period / Total number of
employees