Chapter 4

The HR Forecasting
Process

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Chapter Learning Outcomes
Identify the three different categories of
HR forecasting activity and their
relationship to the HR planning process
Understand the considerable advantages
that accrue to organizations from
instituting effective HR forecasting
procedures
Discuss the rationale for giving special
attention to specialist, technical, and
executive personnel groups in the HR
forecasting process
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Chapter Learning Outcomes
Comprehend the impact of environmental
and organizational variables on the
accuracy and relevant time periods for
future estimates of HR demand and supply
Identify the various stages in the process
of determining net HR requirements
Understand the policy and program
implications of an HR shortage or an HR
surplus

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 Why Is Strategic HR Planning Important to Organizations?

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3 Forecasting Activity Categories

1. Transactional-based forecasting
2. Event-based forecasting
3. Process-based forecasting

And the benefits are

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The Law of Supply and Demand

Supply Demand

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Key Personnel Analyses Conducted by
HR Forecasters

1. Specialist/technical/professional
personnel
2. Employment equity-designated group
membership
3. Managerial and executive personnel
4. Recruits

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Factors Affecting HR Forecasting

Organizational Environmental

Time Horizon

1 3-5 5 plus

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Outcomes of Forecasts
Prediction: A single numerical estimate
of HR requirements associated with a
specific time horizon and set of
assumptions
Projection: Incorporates several HR
estimates based on a variety of
assumptions
Envelope: An analogy in which one can
easily visualize the corners of an envelope
containing the upper and lower limits, or
bounds, of the various HR projections
extending into the future
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Steps in Determining Net HR
Requirements

1. Determine HR demand
2. Ascertain HR supply (includes internal
supply and external supply) and skills
inventory-personal database record on
each employee
3. Determine NET HR requirements
4. Institute HR programs: HR shortage and
HR surplus

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Ascertain HR Supply
Internal supply: Current members of the
organizational workforce who can be
retrained, promoted, transferred, to fill
anticipated future HR requirements
External supply: Potential employees
who are currently undergoing training,
working for competitors, are members of
unions or professional associations, or are
in a transitional stage, between jobs, or
unemployed

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 Determine Net HR Requirements
External
supply requirements =
replacement + change supply components
Changesupply = hiring to increase (or
decrease) the overall staffing level
Replacement supply = hiring to replace all
normal losses
External
supply = current workforce size x
(replacement % per year + change % per
year)

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Calculate External HR Supply

External supply = current workforce size x

(replacement % per year + change % per
year)

If, current workforce = 1000

If, replacement/loss = 11%
If, future growth rate = 7%

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Calculate External HR Supply

External supply = current workforce size x

(replacement % per year + change % per
year)

External supply = 1000 (0.11 + 0.07) = 180

Note: When there is reduction of the

workforce, the change % per year will be
subtracted from the replacement % per year
External supply = 1000 (0.11 - 0.07) = 40
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HR Shortage and Surplus
HR shortage: Occurs when demand for HR
exceeds the current personnel resources
available in the organizations workforce (HR
internal supply)
Demand > Supply

HR surplus: Occurs when the internal

workforce supply exceeds the
organizations requirement or demand
for personnel
Supply > Demand
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